RR 7-95 Consolidated VAT

December 9, 1995
REVENUE REGULATIONS NO. 07-95
SUBJECT : Consolidated Value-Added Tax Regulations
TO : All Internal Revenue Officers and Other Concerned
Pursuant to the provisions of Section 245 and 4 of the National

Internal Revenue Code (NIRC), as amended, in relation to the provisions of Executive
Order No. 273, as amended by Republic Act No. 7716, these Regulations are
hereby promulgated to implement Sections 99, 100, 101, 102, 103,
104, 105, 106, 107, 108, 109, 110 and
111 of Title IV, Sections 112, 115, 117, 119, 120,
121, and 122 of Title V, and Sections 233, 236, 237, 238,
239, 242 and 244 of Title IX all of the NIRC as amended.
COVERAGE, NATURE, BASIS AND RATE OF VALUE-ADDED TAX (VAT)
SECTION 4.99-1. Persons liable. — Any person who, in the course of his
trade or business, sells, barters, exchanges or leases goods or properties, or renders
services, and any person who imports goods shall be liable to VAT imposed in
Sections 100 to 102 of the Code.
However, in the case of importation of taxable goods, the importer, whether an

individual or corporation and whether or not in the course of his trade of business,
shall be liable to VAT imposed in Section 101 of the Code.
"Person" refers to any individual, trust, estate, partnership, corporation, joint

venture, cooperative or association.
"Taxable person" refers to any person liable for the payment of value-added
tax, whether or not registered in accordance with Section 107.
Copyright 2012 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia 2011 1
"In the course of trade or business" means the regular conduct or pursuit of a
commercial or economic activity, including transactions incidental thereto, by any
person regardless of whether or not the person engaged therein is a non-stock,
non-profit private organization (irrespective of the disposition of its net income and
whether or not it sells exclusively to members or their guests), or government entity.
However, any business or businesses pursued by an individual where the

aggregate gross sales or receipts do not exceed P100,000.00 during any 12-month
period shall be considered principally for subsistence or livelihood and not in the
course of trade or business.
The rule of regularity to the contrary notwithstanding, services rendered in the

Philippines by non-resident foreign persons shall be considered as being rendered in
the course of trade or business.
SECTION 4.99-2. Value-added tax: nature and characteristics. — VAT is an

indirect tax and the amount of the tax may be shifted or passed on to the buyer,
transferee or lessee of the goods, properties or services.
These rules shall likewise apply to existing contracts of sale or lease of goods,
properties or services at the time of the effectivity of the R.A. 7716.
SECTION 4.100-1. Value-added tax on sale of goods or properties.

— VAT is imposed and collected on every sale, barter or exchange or transactions
"deemed sale" of taxable goods or properties at the rate of 10% of the gross selling
price.
"Gross selling price" means 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 the value-added tax. The
excise tax, if any, on such goods or properties shall form part of the gross selling
price. In the case of sale, barter or exchange of real property subject to VAT, gross
selling price shall mean the consideration stated in the sales document or the zonal
value whichever is higher. Provided however, in the absence of zonal value, gross
selling price refers to the market value shown in the latest declaration or the
consideration whichever is higher.
"Taxable sale" refers to the sale, barter, exchange and/or lease of goods or
properties, including transactions "deemed sale" and the performance of service for a
consideration, all of which are subject to tax under Sections 100 and 102
of the Code.
Any person otherwise required to register for VAT purposes who fails to
register shall also be liable to VAT on his sale of taxable goods or properties as
defined in the preceding paragraph. The sale of goods subject to excise tax is also
subject to VAT, except manufactured petroleum products (other than lubricating oil,
processed gas, grease, wax and petrolatum).
"Goods or properties" refer to all tangible and intangible object which are
capable of pecuniary estimation and shall include:
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 any industrial

commercial or scientific equipment;
4. The right or the privilege to use motion picture films, film tapes and
discs; and
5. Radio, television, satellite transmission and cable television time.
Sale of real properties held primarily for sale to customers or held for lease in
the ordinarily course of trade or business of the seller shall be subject to VAT.
In the case of sale of real properties on the installment plan, the real estate
dealer shall be subject to VAT on the installment payments, including interest and
penalties, actually and/or constructively received on or after January 1, 1996.
"Sale of real property on the installment plan" means sale of real property by
a real estate dealer, the initial payments of which in the year of sale do not exceed
twenty-five percent (25%) of the gross price.
However, in the case of sale of real properties on the deferred-payment basis,

not on the installment plan before January 1, 1996, the subsequent payments of the
balance of the gross selling price on or after January 1, 1996 shall no longer be
subject to VAT considering that the transactions is treated as cash.
"Sale of real property by a real estate dealer on a deferred payment basis, not
on the installment plan" means sale of real property, the initial payments of which in
the year of sale exceed twenty-five percent (25%) of the gross selling price.
"Initial payments" means payment or payments which the seller receives

before or upon execution of the instrument of sale and payments which he expects or
is scheduled to receive in cash or property (other evidence of indebtedness of the
purchaser) during the year when the sale or disposition of the real property was
made. It covers any downpayment made and includes all payments actually or
constructively received during the year of sale, the aggregate of which determines the
limit set by law.
Initial payments do not include the amount of mortgage on the real property
sold except when such mortgage exceeds the cost or other basis of the property to the
seller, in which case, the excess shall be considered part of the initial payments.
Also excluded from initial payments are notes or other evidences of

indebtedness issued by the purchaser to the seller at the time of the sale.
Pre-selling of real estate properties by real estate dealers shall be subject to

VAT in accordance with rules prescribed above.
"Real estate dealer" includes any person engaged in the business of buying,
developing, selling, exchanging real properties as principal and holding himself out
as a full or part-time dealer in real estate.
Transmission of property to a trustee shall not be subject to VAT if the

property is to be merely held in trust for the trustor and/or beneficiary.
SECTION 4.100-2. Zero-rated sales. — A zero-rated sales by a

VAT-registered person, which is a taxable transaction for VAT purposes, shall not
result in any output tax. However, the input tax on his purchases of goods, properties
or services related to such zero-rated sale shall be available as tax credit or refund in a
accordance with these regulations.
The following sales by VAT-registered persons shall be subject to 0%:
(a) Export sales
"Export Sales" shall mean:
(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 Bangko ng Pilipinas
(BSP);
(2) The sale of raw materials or packaging materials to a

non-resident 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 Bangko Sentral ng Pilipinas (BSP);
(3) The sale of raw materials or packaging material to an

export-oriented enterprise whose export sales exceed seventy percent
(70%) of total annual production;
Any enterprise whose export sale exceed 70% of the total annual
production of the preceding taxable year shall be considered an export-oriented
enterprise upon accreditation as such under the provisions of the Export
Development Act (R.A. 7844) and its implementing rules and regulations.
(4) Sale of gold to the Bangko Sentral ng Pilipinas (BSP);

and
(5) Those considered export sales under Articles 23 and

77 of Executive Order No. 226, otherwise known as the Omnibus
Investments Code of 1987, and other special laws, e.g. Republic Act No.
7227, otherwise known as the Bases Conversion and Development
Act of 1992.
"Considered export sales under Executive Order No. 226 " shall
mean the Philippine port F.O.B. value determined from invoices, bills of lading,
inward letters of credit, landing certificates, and other commercial documents,
of export products exported directly by a registered export producer or the net
selling price of export products sold by a registered export producer to another
export producer, or to an export trader that subsequently exports the same;
Provided, That sales of export products to another producer or to an export
trader shall only be deemed export sales when actually exported by the latter, as
evidenced by landing certificates or similar commercial documents: Provided,
further, That without actual exportation the following shall be considered
constructively exported for purposes of these provisions: (1) sales to bonded
manufacturing warehouses of export-oriented manufacturers; (2) sales to export
processing zones; (3) sales to registered export traders operating bonded
trading warehouses supplying raw materials in the manufacture of export
products under guidelines to be set by the Board in consultation with the
Bureau of Internal Revenue and the Bureau of Customs; (4) sales of foreign
military cases, diplomatic missions and other agencies and/or instrumentalities
granted tax immunities, or locally manufactured, assembled or repacked
products whether paid for in foreign currency or not: Provided, further, that
export sales of registered export traders may include commission income: and
Provided, finally, that exportation of goods on consignment shall not be deemed
export sales until the export products consigned are in fact sold by the
consignee.
(b) Foreign currency denominated sale, those mentioned in Sections

149 and 150 of the Code.
"Foreign currency denominated sale" means the sale to a non-resident

of goods, except those mentioned in Section 149 and 150 of the 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 Bangko Sentral ng Pilipinas
(BSP).
Sales of locally manufactured or assembled goods for household and

personal use to Filipinos abroad and other non-residents of the Philippines as
well as returning Overseas Filipinos under the Internal Export Program of the
government paid for in convertible foreign currency and accounted for in
accordance with the rules and regulations of the Bangko Sentral ng Pilipinas
(BSP) shall also be considered export sales.
(c) Sales to persons or entities whose exemption under special laws,

e.g. R.A. No. 7227 duly registered and accredited enterprises with Subic
Bay Metropolitan Authority (SBMA) and Clark Development (CDA), RA.
No. 7916, Philippine Economic Zone Authority (PEZA), or
international agreements, e.g. Asian Development Bank (ADB), International
Rice Research Institute (IRRI), etc. to which the Philippines is signatory
effectively subject such sales to zero-rate.
SECTION 4.100-3. Effectively zero-rated sale of goods and properties.

— Effectively zero-rated sales of goods and properties shall refer to the sale by a
VAT-registered person to a person or entity who was granted indirect tax exemption
under special laws, e.g. RA 7227 or international agreements, e.g. ADB, IRRI. Under
these Regulations, effectively zero-rated transactions shall cover local sale of goods
and properties to persons or entities who enjoy exemptions from indirect taxes under
par. (a) no (3), pars, (b) and (c) of the preceding section.
SECTION 4.100-4. "Transactions Deemed Sale" — (a) The

following transactions shall be "deemed sale" pursuant to Section 100 (b) of the
Code:
(A) 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 the VAT-registered person withdraws goods from his business for his
personal use;
(B) Distribution or transfer to:
1) Shareholders or investors are share in the profits of the

VAT-registered person;
Property dividends which constitute stocks in trade or properties

primarily held for sale or lease declared out of retained earnings on or
after January 1, 1996 and distributed by the company to its shareholders
shall be subject to VAT based on the zonal value or fair market value at
the time of distribution, whichever is applicable.
(2) Creditors in payment of debt or obligation.
(C) 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 is not deemed sold;
(D) 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" for purposes of this Section;
(i) Change of ownership of the business; and
(ii) Dissolution of a partnership other than a general

professional partnership and creation of a new partnership which takes
over the business.
(b) The Commissioner shall, by regulations, determine the appropriate

tax base in cases where a transaction is deemed a sale, barter or exchange of
goods or properties under paragraph (B) hereof, or where the gross selling price
is unreasonably lower than the actual market value.
SECTION 4.100-5. Changes in or cessation of status as a

VAT-registered person. — a) Subject to tax. — The value-added tax provided for in
Sections 100 and 102 of the Code shall apply to services, goods, or
properties originally intended for sale or for use in business and capital goods which
are existing as of the occurrence of the following:
(1) Change of business activity from value-added status to exempt

status. An example is a VAT-registered person engaged in a taxable activity like
wholesaler or retailer who decides to discontinue such activity and engages
instead in life insurance business or in any other business not subject to VAT;
(2) Approval of a request for cancellation of registration due to

reversion to exempt status.
(3) Approval of a request for cancellation of registration due to a desire

to revert to exempt status after the lapse of two (2) consecutive years from the
time of registration by a person who voluntarily registered inspite of being
exempt under Section 103 (a), (b), (c) and (d) of the
Code with respect to his export sales only, and Section 103(t) of the Code.
(4) Approval of a request for cancellation of registration of one who

commenced business with the expectation of gross sales or receipts exceeding
P500,000.00 but who failed to exceed this amount during the first twelve
months of operation.
(b) Not subject to output tax. — The VAT shall not apply to goods or
properties existing as of the occurrences of the following:
1) Change of control of a corporation by the acquisition of the

controlling interest of such corporation by another stockholder or group
of stockholder, Example: transfer of property to a corporation in
exchange for its shares of stock under Section 34(c)(2)and(6)(c) of the
Code.
2) Change in the trade or corporate name of the business;
3) Merger or consolidation of corporations. The unused input
tax of the dissolved corporation as of the date of merger or consolidated
shall be absorbed by the surviving or new corporation.
SECTION 4.100-6. Computation of output tax. — The output tax on the

sale of goods or properties during the month or quarter shall be computed by
multiplying the total amount indicated in the invoice by 1/11. In taxable sales of
real property where the zonal value/market value applies, output tax shall be
computed by multiplying the zonal value or market value, as the case may be, by
1/11.
"Output tax" means the value-added tax due on the sale or lease of taxable
goods or properties or services by any person registered or required to register under
Section 107.
Where the gross selling stated in the invoice is unreasonably lower than the
actual market value, the Commissioner shall be regulations determine the appropriate
tax base.
In computing the taxable base during the month or quarter, the following shall
be allowed as deduction from gross selling price:
(A) Discounts determined and granted at the time of sale which are
expressly indicated in the invoice, and the amount thereof forming part of the
gross sales duly recorded in the books of accounts.
Sales discount indicated in the invoice at the time to sale and the grant of
which does not depend upon the happening of a future event may be excluded
from the gross sales within the same month/quarter it was given.
(B) Sales returns and allowances for which a proper credit or refund
was made during the month or quarter to the buyer for sales previously recorded
as taxable sales.
(b) On transactions "deemed sale". — The output tax equivalent to 10%

based on the market value of the goods deemed sold shall be imposed as of the
occurrence of the transactions enumerated in Section 4.100-4 (A), (B) and (C) of
these Regulations. However, in the case of retirement from or cessation of business
under Section 4.100-4(D) of these Regulations, the tax base shall be the acquisition
cost or the current market price of the goods, whichever is lower.
(c) Basis of tax arising from changes in or cessation of status of a taxpayer as
a VAT-registered person. — The output tax on goods or properties originally
intended for sale or for use in business, including capital goods, existing as of the time
of the changes in or cessation of the status of a taxpayer as a VAT-registered person,
shall be based on the acquisition cost or the current market price of the goods,
whichever is lower.
Any unused input taxes as of the retirement, change or cessation of status as

VAT-registered person shall be allowed as credit against any output tax resulting
therefrom. The balance, if any, shall, subject to the filing of an application within two
years from date of retirement, cessation or change of status, be issued a tax credit
certificate which can be used a payment of any internal revenue tax due from him or a
tax refund, if he has no pending internal revenue tax liability.
SECTION 4.100-1. Value-Added tax on importation of goods. —

(a) In general. — The VAT is imposed on goods and properties brought into the
Philippines, whether for use in business or not. The tax shall be based on the total
value, used by the Bureau of Customs in determining tariff and customs duties, plus
customs duties, excise tax, if any, and other charges prior to the release of the goods
or properties from customs custody such as postage, commissions, and similar
charges.
In case the valuation used by the Bureau of Customs in computing customs

duties is by volume or quantity, the landed cost shall be the basis for computing the
value added tax. 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.
Importation of petroleum products and the raw materials to be used by the

importer himself in the manufacturer thereof, subject to excise tax under Title VI
of the Code, shall be exempt from VAT. However, VAT shall be collected from
the importer of lubricating oil, processed gas, grease, wax and petrolatum and the raw
materials to be used in the manufacture thereof.
(b) Applicability and Payment. — The rates prescribed under Section 101 (a)
shall be applicable to all importations withdrawn from custom custody.
The value-added tax or importation shall be paid by the importer prior to the
release of such goods from customs custody.
"Importer" refers to any person who brings goods into the Philippines, whether
or not made in the course of his trade or business. It includes non-exempt persons or
entities who acquire tax-free imported goods from exempt persons, entities or
agencies.
(c) Sale, transfer or exchange of imported goods by tax-exempt persons.

— In the case of goods imported into the Philippines by VAT-exempt persons,
entities or agencies which are subsequently sold, transferred or exchanged in the
Philippines to non-exempt persons or entities, the latter shall be considered the
importers thereof who shall be liable for VAT on such importation.
SECTION 4.102-1. Value-Added Tax on the sale of services and use or

lease of properties. — (a) Sale or exchange of services, as well as the use or
lease of properties, as defined in Section 102(a) of the Code shall be subject to
VAT.
"Sale or exchange or services" means the performance of all kind of services

in the Philippines for others for a fee, remuneration or consideration, 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) 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, resthouses,

pension houses, inns, resorts;
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) operators of taxicabs;
12) utility cars for rent or hire driven by the lessees (rent-a-car
companies), tourist buses;
13) other common carriers by land, air, and sea relative to their
transport of goods or cargoes;
14) franchise grantees of telephone and telegraph, radio and television

broadcasting and all other franchise grantees except those under Section 117
and 118 of the Code;
15) banks, non-bank financial intermediaries, finance companies and

other financial intermediaries not performing quasi-banking functions;
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.
The phrase "sale or exchange of services" shall likewise include:
(1) The lease or the use of or the right 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 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 subparagraph (2) hereof or any such
knowledge or information as is mentioned in subparagraph (3) hereof; or
(5) The supply of services by a non-resident person or his/its employee

in connection with the use of property or rights belongings 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 tapes and discs;
(8) The lease or the use of or the right to use, television, satellite
transmission and cable television time.
"Real estate lessor" includes any person engaged in the business of leasing or
subleasing real property.
Lease of property shall be subject to VAT regardless of the place where the
contract of lease or licensing agreement was executed if the property leased or used is
in the Philippines.
(b) The VAT on rental and/or royalties payable to non-resident foreign

corporations or owners for the sale of services and use or lease of properties in the
Philippines shall be based on the contract price agreed upon by the licensor and the
licensee. The licensee shall be responsible for the payment of VAT on such rentals
and/or royalties in behalf of the non-resident foreign corporation or owner by filing a
separate VAT declaration/return for this purpose. They duly validated VAT
declaration/return is sufficient evidence in claiming input tax credit by the licensee.
"Non-resident lessor/owner" refers to any person, natural or juridical, an

alien, or a citizen who establishes to the satisfaction of the Commissioner the fact of
his physical presence abroad with a definite intention to reside therein, and who
owns/leases properties, real or personal, whether tangible or intangible, located in
the Philippines.
(c) In a lease contract, the advance payment by the lessee may be: (i) a loan
to the lessor from the lessee, or (ii) an option money for the property, or (iii) a
security deposit to insure the faithful performance of certain obligations of the lessee
to the lessor, or (iv) pre-paid rental.
If the advance payment is actually a loan to the lessor, or an option money for
the property, or a security deposit for the faithful performance of certain obligations
of the lessee, such advance payment is not subject to VAT.
However, a security deposit that is applied to rental shall be subject to VAT.
If the advance payment is, in fact, a pre-paid rental, then such payment is
taxable to the lessor in the month or quarter when received regardless of the
accounting methods used.
(d) Non-life insurance companies including surety, fidelity, indemnity and

bonding companies are now subject to VAT. They are no longer liable to the payment
of the premium tax under Section 121 of the Code.
"Non-life insurance companies" including surety, fidelity, indemnity and

bonding companies shall include all individuals, partnerships, associations, or
corporations, including professional reinsurers defined in Section 280 of PD 612,
otherwise known as The Insurance Code of the Philippines, mutual benefit
associations and government-owned or controlled corporations, engaging in the
business of property insurance, as distinguished from insurance on human lives,
health, accident and insurance appertaining thereto or connected therewith.
Reinsurance premiums are subject to VAT.
The VAT due from the foreign reinsurance company is to be withheld by the
local insurance company and to be remitted to the BIR by filing a separate VAT
declaration/return.
Commissions of insurance agent and/or brokers are subject to VAT.
The gross receipts on non-life insurance companies shall mean total premiums
collected, whether paid in money, notes, credits or any substitute for money.
"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
and advance payments actually or constructively received during taxable quarter for
the services performed or to be performed for another person, excluding VAT. It shall
likewise refer to "gross income" as defined under Section 28 (a) of the Code,
whenever applicable.
"Constructive receipt" occurs when the money consideration or its equivalent

is placed at the control of the person who rendered the service without restrictions by
the payor. The following are examples of constructive receipts.
1) deposit in banks which are made available to the seller of services

without restrictions.
2) issuance by the debtor of a notice to offset any debt or obligation
and acceptance thereof by the seller as payment for services rendered; and
3) transfer of the amounts retained by the contractee to the account

of the contractor.
(e) Dealers in securities and lending investors shall be subject to VAT on the
basis of the gross income they derive, respectively, from their sale or exchange of
securities or their lending activities.
"Dealer in securities" means a merchant of stock or securities, whether an

individual partnership or corporation, with an established place of business,
regularly engaged in the purchase of securities and their resale to customers, that is,
one who as a merchant buys securities and sells them to customers with a view to the
gains and profits that may be derived therefrom.
"Lending investor" include all persons other than banks, non-bank financial
intermediaries, finance companies and other financial intermediaries not performing
quasi-banking functions who make a practice of lending money for themselves or
others at interest.
In the case of pre-need companies, they shall be considered as dealers in

securities and their gross receipts shall mean actual receipts on contract price minus
contributions to the trust funds to be set up independently as mandated by the
Securities and Exchange Commission.
(f) Services of franchise grantees of telephone and telegraph, radio and

television broadcasting and all other franchise grantees except electric, gas and water
utilities shall be subject to VAT. However, they are no longer subject to the franchise
tax on their gross receipts derived from their franchised operations under their
respective charters or Section 117 of the Code. Amounts received for overseas
dispatch, message, or conversion originating from the Philippines are still subject to
the percentage tax under Sec. 118 of the Code.
Franchise grantees of telephone and telegraph shall be subject to VAT on their

gross receipts derived from their telephone, telegraph, telewriter exchange, wireless
and other communication equipment services.
(g) A person engaged in milling for other (except palay into rice, corn into
corn grits, and sugarcane into raw sugar) is subject to VAT on sale of services. If the
miller is paid in cash for his services, the VAT shall be based on his gross receipts
during the month or quarter. If he received a share of the milled products, instead of
cash, the VAT shall be based on the actual market value of his share in the milled
products. Sale by the owner or the miller of his share of the milled product (except
rice, corn grits and raw sugar) shall be subject to VAT on sale of goods.
(h) All receipts from service, hire, or operating lease of transportation

equipment not subject to tax on common carriers and keepers of garages, shall be
subject to VAT.
"Common carrier" refer to persons, corporations, firms or associations

engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services to the public and shall
include transportation contractors.
Operators of taxicabs, utility cars for rent or hire driven by lessee, and tourist
buses, shall subject to VAT but not to the percentage tax imposed under Section 115
of the Code.
"Warehousing service" means rendering personal services of a warehouseman

such as:
1. engaging in the business of receiving and storing goods of others

for compensation or profit;
2. receiving good and merchandise to be stored in his warehouse for

hire;
3. keeping and storing goods for other, as a business and for use.
SECTION 4.102-2. Zero-Rating. — (a) In general. — A zero-rated sale

by a VAT registered person, which is a taxable transaction for VAT purposes, shall
not result in any output tax. However, the input tax on his purchases of goods,
properties or services related to such zero-rated sale shall be available as tax credit or
refund in accordance with these regulations.
(b) Transaction subject to zero-rate. — The following services performed in

the Philippines by VAT-registered persons shall be subject to 0%:
(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 BSP;
(2) Services other than those mentioned in the preceding subparagraph,
e.g. those rendered by hotels and other service establishments, the consideration
for which is paid for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the 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-rate;
(4) Services rendered to vessels engaged exclusively in international

shipping;
(5) Services performed by subcontractors and/or contractors duly

accredited by either the Board of Investments or the Export Development
Council in processing, converting, or manufacturing goods for an enterprise
whose export sales exceed seventy percent (70%) of the total annual production.
(c) Effectivity zero-rated sale of services. — Effectively zero-rated sales of

services shall refer to the sale by a VAT-registered person to a person or entity who
was granted indirect tax exemption under special laws, or international agreements.
Under these Regulations, effectively zero-rated transactions shall be limited to the
local sale of services to persons or entities who enjoy exemptions form indirect taxes
under subpar, (b) Nos. (3) (4) and (5) of this section.
SECTION 4.103-1. Exemptions. — (A) In general. — An exemptions

means that the sale of goods or properties and/or services and the use or lease of
properties is not subject to VAT (output tax) and the seller is not allowed any tax
credit on VAT (input tax) previously paid.
The person making the exempt sale of good, properties or services shall not bill
any output tax to his customers because the said transaction is not subject to VAT. On
the other hand, a VAT-registered purchaser of VAT-exempt goods/properties or
services which are exempt from VAT is not entitled to any input tax on such purchase
despite the issuance of a VAT invoice or receipt.
(B) Exempt transactions. — The following shall be exempt from the

VAT:
(a) Sale of nonfood agricultural, marine and forest products in their

original state by the primary producer or the owner of the land where the same
are produced. In the hands of a subsequent seller, the sale shall be subject to
VAT.
(b) Sale of cotton and cotton seeds in their original state; and copra;
(c) 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 therefor. However, importation of meat shall be subject to VAT.
Livestock shall include cows, bulls and calves, pigs, sheep, goats and
rabbits. Poultry shall include fowls, ducks, geese and turkey. (It does not include
fighting cocks, race horses, zoo animals and other animals generally considered
as pets.)
Marine food products shall include fish and crustaceans, such as, but not
limited to, eels, trout, lobster, shrimps, prawns, oysters, mussels and clams.
Meat, fruit, fish, vegetables and other agricultural and marine good
products, 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, smoking or stripping, including those using
advanced technological means of packaging, such as shrink wrapping in plastics,
vacuum packing, tetra-pak, and other similar packaging methods.
Polished and/or husked rice, corn grits and locally produced raw cane
sugar and ordinary salt shall be considered as agricultural food products in their
original state.
Raw cane sugar refers to crystallized or solidified juice of sugarcane,

distinctly brown in color resulting from the simple and primary milling process
such as treating the juice with lime to remove impurities, boiling and spinning the
syrup to force out the molasses. It does not include cane sugar commonly known
as "washed sugar", plantation washed sugar" and "blanco directo" sugar, which
are, for purposes of this exemption, considered as refined sugar. Molasses
and bagasse are not also covered by the exemption.
(d) 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);
"Specialty feeds" refer to non-agricultural feeds or food for race horses,
fighting cocks, aquarium fish, zoo animals and other animals generally
considered as pets.
(e) Sale or importation of petroleum products (except lubricating oil,

processed gas, grease, wax and petrolatum) subject to excise tax imposed under
Title VI;
(l) Sale or Importation of raw materials to be used by the buyer or

importer himself in the manufacture of petroleum products subject to excise tax,
except lubricating oil, processed gas, grease, wax and petrolatum;
(g) Importation of passenger and/or cargo vessel of more than five

thousand tons, whether coastwise or ocean going, including engine and spare
parts of said vessel to be used by the importer himself as operator thereof;
(h) 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
customs duties under the Tariff and Customs Code of the Philippines;
(i) 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;
(j) Services subject to percentage tax under Title V, are as follows:
1. Sale or lease of goods or properties or the performance of

service other than the transactions mentioned in paragraph (a) to (s),
Section 103, the gross annual sales and/or receipts of which do
not exceed the amount of FIVE HUNDRED THOUSAND PESOS
(P500,000.00) (Sec. 112, NIRC);
2. Keepers of garages and common carriers by land, air or

water for the transport of passenger (Sec. 115, NIRC);
3. Franchise grantees on electric, gas and water utilities

(Sec. 117, NIRC);
4. Person, company or corporation (except purely cooperative

companies or associations) doing life insurance business of any sort in the
Philippines (Sec. 121, NIRC)
5. Overseas dispatch, messages or communications originating

from the Philippines (Sec. 118, NIRC).
(k) Services by agricultural contract growers and milling for others of

palay into rice, corn into grits, and sugar cane into raw cane sugar.
"Agricultural contract growers" refer to those producing for others

poultry, livestock or other agricultural and marine food products in their
original state.
(l) Medical, dental, hospital and veterinary services, except those

rendered by professionals.
Laboratory services are also exempted. If the hospital or clinic operates a

pharmacy or drug store, the sale of drugs and medicine, if it exceeds
P500,000.00 during a 12-month period, is subject to VAT.
(m) Educational services refer to academic, technical or vocational

education provided by private educational institutions duly accredited by the
DECS and those rendered by government educational institutions and shall
include the sale or rental of books used in the above activities by such
educational institutions. It does not include seminars, in-service training, review
classes and other similar services rendered by persons who are not accredited by
the DECS.
(n) Sale of works of art, literary works and musical compositions is

exempt only if sold by the artist himself. If sold by other persons in the course of
business, it shall be subject to VAT. If the services of the artist are engaged for
the production of such works, his receipts therefrom are exempt from VAT.
(o) Services rendered by individual pursuant to an employer-employee

relationship;
(p) 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 from the
Philippines;
(q) Transactions which are exempt under international agreements to

which the Philippines is a signatory, as well as under special laws, except those
granted under the following laws:
1. P.D. No. 66 — Export Processing Zone Authority

(EPZA)-registered firms;
2. P.D. No. 529 — Petroleum Exploration Concessionaires under the

Petroleum Act of 1949;
3. P.D. No. 972 — Operators of Coal Mines;
4. P.D. No. 1491 — Export-oriented industries in the Phividec

Industrial areas;
5. P.D. No. 1590 — Philippine Airlines (PAL) relative to domestic

transport of goods or cargoes;
6. P.D. No. 6938 — Non-electric cooperatives.
Cooperatives, except electric cooperative, duly registered under R.A No. 6938,
otherwise known as the "Cooperative Code of the Philippines", transacting
business with members only or with both members and non-membership are subject
to VAT.
"Non-electric cooperative" refers to a duly registered association of persons

entitled to such rights and privileges granted by Republic Act No. 6938, otherwise
known as the Cooperative Code of the Philippines, which is not formed primarily for
the purpose of supplying, promoting and encouraging the fullest use of electric
service to its members pursuant to the provisions of P.D. No. 269.
Importations by non-electric cooperatives under R.A No. 6938 of machinery,

equipment and spare parts to be used by them are subject to VAT.
Electric cooperatives are not subject to VAT on their sale of electricity,

however, their importations, regardless of whether or not the goods are locally
available, are subject to VAT.
(r) Export sales by persons who are not VAT-registered,
(s) 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 housing under BP 220 or PD 957 and other related laws and socialized
housing as defined by RA No. 7279, otherwise known as the "Urban Development
and Housing Act of 1992 wherein the price ceiling per unit is P375,000.00 for
low-cost housing and P150,000.00 for socialized housing or may from time to time be
determined by the Housing and Land Use Regulatory Board (HLURB).
"Low-Cost housing" refers to housing projects intended for homeless

low-income family beneficiaries, undertaken by government or private developers,
which may either be subdivision or a condominium, registered and licensed by the
Housing and Land Use Regulatory Board/Housing and Urban Development
Coordinating Council (HLURB/HUDCC) under BP 220, PD 957 or any other similar
law, wherein the unit selling price is within the selling price ceiling per unit of BP 220
as determined from time to time by HLURB/HUDCC.
"Socialized housing" refers to housing programs and projects covering houses

and lots or homelots only undertaken by the Government or the private sector for the
underprivileged and homeless citizens which shall include sites and services
development, long-term financing, liberalized terms on interest payments, and such
other benefits in accordance with the provisions of R.A. No. 7279 otherwise known as
the "Urban Development and Housing Act of 1992." "Socialized housing" shall also
refer to projects intended for the underprivileged and homeless wherein the housing
package selling price is within the lowest interest rates under the Unified Home
Lending Program (UHLP) or any equivalent housing program of the Government, the
private sector or non-government organizations.
Lease of residential units, boarding houses, dormitories, rooms and bedspaces

offered for rent their owners at a monthly rental of not more than amount allowed
under the Rent Control Law (now equivalent to P2,750.00 per month, subject to the
annual adjustment provided under the Rent Control Law), shall not be subject to
VAT.
The term "residential units" shall refers to apartment, houses and/or lands on
which another's dwelling is located, used for residential purposes and shall include
not only buildings, parts or units thereof used solely as dwelling places, except
motels, motel rooms, hotels, and hotel rooms. "Residential units" shall also include
apartments, houses, building, part or units/thereof used for home industries, retail
stores or other business purposes if the tenant thereof and his family actually live
therein and use them principally for dwelling purposes.
(t) 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 of which do not exceed the amount of FIVE HUNDRED
THOUSAND PESOS (P500,000.00).
The foregoing exemptions to the contrary notwithstanding, any person whose

sale of goods, properties or services which are otherwise not subject to VAT, but who
issues a VAT invoice or receipts therefor shall, in addition to his liability to other
applicable percentage tax, if any, be liable to the tax imposed in Sections 100
or 102 of the Code without the benefit of input tax credit, and such tax shall not
also be recognized as input tax credit to the purchaser under Section 104,
of the Code.
(u) Foreign and local donations to, as well as, by religious institutions of
religious articles, particularly bibles, crucifix, vestments or similar articles, to be used
actually, directly and exclusively for religious purposes and not done in the ordinary
course of trade or business.
(v) Sale of books, magazines, periodicals, newspapers, including book

publishing and printing, as well as its distribution and circulation, except their
importation, shall be exempt from the coverage of the expanded value added tax law
pursuant to R.A 8047.
TAX CREDITS
SECTION 4.104-1. Credits for input tax. —
"Input tax" means the value-added tax due from or paid by a VAT-registered
person on importation of goods or local purchases of goods or services, including
lease or use of property, from another VAT-registered person in the course of his
trade or business. It shall also include the transitional or presumptive input tax
determined in accordance with Section 105 of the Code.
It includes input taxes which can be directly attributed to transactions subject

to the value-added tax plus a ratable portion of any input tax which cannot be directly
attributed to either the taxable or exempt activity.
Any input tax evidenced by a VAT invoice or official receipt issued by a

VAT-registered person in accordance with Section 108 of the Code, on the
following transactions, shall be creditable against the output tax:
(a) Purchase or importation of goods
1. For sale; or
2. For conversion into or intended to form part of a finished

product for sale, including packaging materials; or
3. For as supplies in the course of business; or
4. For use as raw materials supplied in the sale of services; or
5. For use in trade or business for which deduction for

depreciation or amortization is allowed under the Code, except
automobiles, aircraft and yachts.
"Automobile" as contemplated in this section, shall mean a 4-wheeled luxury

motor vehicle, which is used in the trade or business of the VAT taxpayer, propelled
by any motive fuel with engine displacement of 2,000 cc or more, and specially
designed for the transport of persons and not use primarily for the carrying of freight
or merchandise; Provided, however, that the definition shall not apply to those
required in the trade or business of the VAT taxpayer, such as hotel limousines,
funeral hearse, ambulances and similar vehicles.
(b) Purchase of real properties for which a VAT has actually been paid;
(c) Purchase of services in which a VAT has actually been paid;
(d) Transactions "deemed sale" under Section 100 (b) of the

Code;
(e) Presumptive input tax allowed to be carried over as provided for in

Section 4.105-1 of these Regulations;
(f) A VAT-registered person who is also engaged in transactions not

subject to VAT shall be allowed input tax credit as follows:
1. Total input which can be directly attributed to transactions

subject to VAT; and
2. A ratable portion of any input tax which cannot be directly

attributed to either activity.
SECTION 4.104-2. Persons who can avail of the input tax credit. — The
input tax credit on purchase of goods or properties or services shall be creditable:
(a) To the purchaser of the domestic goods or properties upon

consummation of the sale and on the importation of said goods or properties.
(b) To the importer upon payment of VAT prior to the release of

goods from Customs custody.
(c) To the purchaser of services or the lessee or licensee upon payment

of the compensation, rental, royalty or fee.
SECTION 4.104-3. Determination of input tax deductible during a

taxable month or quarter. — All input taxes creditable to a VAT-registered
person during a taxable month or quarter plus any input tax carried over from the
preceding month or quarter shall be reduced by the amount of the claim for refund or
tax credit for VAT and other adjustments, such as, purchase returns or allowances and
input tax attributable to exempt sales.
The claim for tax credit shall include not only those filed with the Bureau of
Internal Revenue but also those filed with the Department of Finance, the Board of
Investments and the Bureau of Customs.
SECTION 4.104-4. Determination of the output and input taxes and

computation of VAT payable or excess tax credits. — In the sale of goods,
properties or services, VAT is computed by multiplying the total amount indicated in
the invoice or receipt by 1/11. This is referred to as the "output tax". In sale of real
property subject to VAT where the zonal or market value applies, the VAT is
computed by multiplying the zonal or market value by 1/11.
The creditable input tax is the VAT on transactions enumerated in Section

4.104-1 of these Regulations.
If at the end of any taxable quarter, the output tax exceeds the input tax, excess
shall be paid by the VAT-registered person. This is termed as the VAT payable. If,
however, the input tax exceeds the output tax, the excess shall be carried over the
succeeding months or quarters.
SECTION 4.104-5. Substantiation of claims for input tax credit. — (a)

Input taxes shall be allowed only if the domestic purchase of goods, properties or
services is made in the course of trade or business. The input tax should be supported
by an invoice or receipt showing the information as required under Section 108 (a)
and 238 of the Code. Input tax on purchases of real property should be
supported by a copy of the public instrument i.e. deed of absolute sale, deed of
conditional sale, contract/agreement to sell, etc., together with the VAT receipt issued
by the seller.
A cash-register machine tape issued to a VAT registered buyer by a

VAT-registered seller form a machine duly registered with the BIR in lieu of the
regular sales invoice, shall constitute valid proof of substantiation of tax credit only if
the name and TIN of the purchaser is indicated in the receipt and authenticated by a
duly authorized representative of the seller.
(b) Input tax on importations shall be supported with the import entry or other
equivalent document showing actual payment of VAT on the imported goods.
(c) Presumptive input tax shall be supported by an inventory of goods as

shown in a detailed list to be submitted to the BIR.
(d) Input tax on "deemed sale" transactions shall be substantiated with the
required invoices.
(e) Input tax from payments made to non-residents shall be supported by a

copy of the VAT declaration/return filed by the resident licensee/lessee in behalf of
the non-resident licensor/lessor evidencing remittance of the VAT due.
SECTION 4.105-1. Transitional input tax on beginning inventories.

— Taxpayers who became VAT-registered persons upon effectivity of RA No.
7716 who have exceeded the minimum turnover of P500,000.00 or who voluntarily
register even if their turnover does not exceed P500,000.00 shall be entitled to a
presumptive input tax on the inventory on hand as of December 31, 1995 on the
following; (a) goods purchased for sale in their present condition; (b) materials
purchased for further processing, but which have not yet undergone processing; (c)
goods which have been manufactured by the taxpayer; (d) goods in process and
supplies, all of which are for sale or for use in the course of the taxpayer's trade or
business as a VAT-registered person.
However, in the case of real estate dealers, the basis of the presumptive input
tax shall be the improvements, such as buildings, roads, drainage systems, and other
similar structures, constructed on or after effectivity of E.O. 273 (January 1, 1988).
The transitional input tax shall be 8% of the value of the inventory or actual
VAT paid, whichever is higher, which amount may be allowed as tax credit against
the output tax of the VAT-registered person.
The value allowed for income tax purposes on inventories shall be the basis for
the computation of the 8% excluding goods that are exempt from VAT under
SECTION 103. Only VAT-registered persons shall be entitled to presumptive input
tax credits.
SECTION 4.106-1. Refunds or tax credits of input tax. — (a)

Zero-rated sales of goods or properties or services — Only a VAT-registered person
may be given a tax credit certificate or refund of VAT paid corresponding to the
zero-rated sales of goods, properties or services, excluding the presumptive input tax
and to the extent that such input tax has not been applied against the output tax. The
application should be made within two (2) years after the close of the taxable quarter
when the sales were made.
However, where the taxpayer is engaged in both zero-rated or effectively

zero-rated sales and in taxable or exempt sales of goods, properties or services, and
where the amount of creditable input tax due or paid cannot be directly and entirely
attributed to any one of the transaction, only the proportionate share of input taxes
allocated to zero-rated or effectivity zero-rated sales can be refunded or issued a tax
credit certificate.
(b) Capital Goods — Only a VAT-registered person may apply for issuance
of a tax credit certificate or refund of input taxes paid on capital goods imported or
locally purchased. The refund shall be allowed to the extent that such input taxes have
not been applied against output taxes. The application should be made within two (2)
years after the close of the taxable quarter when the importation or purchase was
made.
Refund of input taxes on capital goods shall be allowed only to the extent that
such capital goods are used in VAT taxable business. If it is also used in exempt
operations; the input tax refundable shall only be ratable portion corresponding to the
taxable operations.
"Capital goods or properties" refer to goods or properties with estimated

useful life greater than one year and which are treated as depreciable assets under
Section 29 (f), used directly or indirectly in the production or sale of taxable goods or
services.
(c) Land — Only a VAT-registered person may apply for issuance of a tax
credit certificate or refund of input taxes on land purchased to the extent that such
input tax has not been applied to output tax. The application should be made within
two (2) years after the close of the taxable quarter when the purchase was made.
Refund of input taxes on land shall be allowed only to the extent that such land
is used in VAT taxable business.
(d) Any unused input taxes as of the date of retirement, change or cessation
of status of a VAT-registered person shall be allowed as credit against any output tax
resulting from such change of status and the balance, if any, shall, subject to the filing
of an application within two (2) years from the date of retirement, change or cessation
of status, be issued a tax credit certificate/refund.
SECTION 4.106-2. Procedures for claiming refunds or tax credits of

input tax — (a) Where to file the claim for refund or tax credit — Claims for
refunds or tax credit shall be filed with the appropriate Revenue District Office
(RDO) having jurisdiction over the principal place of business of the taxpayer.
However, direct exporters may also file their claim for tax credit with the One Stop
Shop Center of the Department of Finance.
(b) Cancellation of VAT registration — A person whose registration has been

cancelled due to retirement from or cessation of business, or due to changes in or
cessation of status under Section 100(c) of the Code may, within two (2) years from
the date of cancellation, apply for the issuance of a tax credit certificate for any
unused input tax which he may use in payment of his other internal revenue taxes.
However, he shall be entitled to a refund if he has no pending internal revenue tax
liabilities.
(c) Period within which refund or tax credit of input taxes shall be made. —
In proper cases, the Commissioner shall grant a tax credit/refund for creditable input
taxes within sixty (60) days from the date submission of complete documents in
support of the application filed in accordance with subparagraphs (a) and (b) above.
In case of full or partial denial of the claim for tax credit/refund as decided by
the Commissioner of Internal Revenue, the taxpayer may appeal to the Court of Tax
Appeals within thirty (30) days from the receipt of said denial, otherwise the decision
will become final. However, if no action on the claim for tax credit/refund has been
taken by the Commissioner of Internal Revenue after the sixty (60) day period
from the date of submission of the application but before the lapse of the two (2) year
period from the date of filing of the VAT return for the taxable quarter, the taxpayer
may appeal to the Court of Tax Appeals.
(d) Manner of giving refund. — Refund shall be made upon warrants

drawn by the Commissioner or by his duly authorized representative without the
necessity of being countersigned by the Chairman, Commission on Audit (COA), the
provision of the Revised Administrative Code to the contrary notwithstanding:
Provided, that refunds under this paragraph shall be subject to post audit by the COA.
COMPLIANCE REQUIREMENTS
SECTION 4.107-1. Registration of Value Added Taxpayers. (a) In

general. — Any person who sells, barters, exchanges, leases goods or
properties and renders services subject to VAT imposed in Sections 100 and
102 of the Code shall register the appropriate Revenue District Officer using
BIR Form No. 1556 and pay an annual registration fee in the amount of One thousand
pesos (P1,000) using BIR Form No. 1558 for every separate or distinct
establishment or place of business and every year thereafter on or before the 31st day
of January.
However, at the option of the taxpayer, payment may be made on a quarterly

basis in the amount of P250.00 payable on or before the 31st day of January for the
first quarter and on or before the 20th day of the first month of the calendar quarter
thereafter. Provided further, that a new taxpayer who registers after the first calendar
quarter shall pay a registration fee in an amount proportionate to the remaining
quarters of the year.
"Separate or distinct establishment" shall mean any branch or warehouse

where a taxpayer conducts his business operation.
"Branch" means a fixed establishment in a locality which conducts sales

operation of the business as an extension of the principal office.
"Principal place of business" refers to the place where the head or main office
is located as appearing in the corporation's Articles of Incorporation. In the case of
an individual, the principal place of business shall be the place where the head or
main office is located and where the books of accounts are kept.
"Warehouse" means the place or premises where the inventory of goods for
sale are kept and from which such goods are withdrawn for delivery to customers,
dealers, or persons acting in behalf of the business.
Any person who maintains a head or main office and branches in different
places shall register with the Revenue District Office which has jurisdiction over the
place wherein the main or head office or branch is located. However, the registration
fee shall be paid any accredited bank in the Revenue District where such person is
registered provided that in areas where there are no accredited banks, the same shall
be paid to the Revenue District Officer, collection agent, or duly authorized treasurer
of the municipality where each place of business or branch is situated.
Each VAT-registered person shall be assigned only one Taxpayer's

Identification Number (TIN).
"VAT-registered person" refers to any person registered in accordance with

Sec. 107.
"VAT-registrable person" refers to any person who is required to register

under the provisions of Section 107 (a) (b) or (c), as amended, but failed to register.
(b) Mandatory:
1) Persons covered. — Every person who, in the course of

trade or business, sells, barters, exchanges, leases goods, properties or renders
services subject to VAT, if the aggregate amount of his actual or expected gross
sales and/or gross receipts exceeds FIVE HUNDRED THOUSAND PESOS
(P500,000.00) for any 12-month period;
2) Persons first beginning business. — Any person, before

engaging in the business of selling or leasing goods, properties or services
subject to VAT under Sections 100 and 102 of the Code, whose expected gross
sales or receipts on all taxable activities of the next 12-month period shall exceed
P500,000.00, must register and pay the applicable registration fee within 30 days
before the start of such business in the manner prescribed under Sec. 4.107-1.
3) Persons becoming liable to the Value-added tax. — Any

person whose gross taxable sales or receipts in any 12-month period exceeds the
amount of P500,000.00 shall register within thirty (30) days after the end of the
last month of that period and pay the applicable registration fee in the manner
prescribed under Sec. 4.107-1; and shall be liable to the value-added tax
commencing from the first day of the month following his registration.
(c) Optional Registration of VAT-Exempt Person. — Any of the following

VAT-exempt persons may, at their option, apply for VAT Registration:
1) Seller of goods, properties or services whose taxable sale or gross
receipts do not exceed FIVE HUNDRED THOUSAND PESOS (P500,000.00)
for any 12-month period;
2) Export seller of agricultural and marine food products in their

original state;
3) Export seller 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;
4) Export seller of non-food agricultural products, marine and forest

products in their original state by the primary producer or owner of the land
where the same are produced;
5) Export seller of cotton and cotton seeds in their original state; and
copra.
Once registered as a VAT person, the taxpayer shall be liable to output

tax and be entitled to input tax credit in accordance with the provisions of Sec.
104 and 105 of the Tax Code.
(d) Application for effective zero-rating. — Except for actual export sale,
other cases of zero-rated sales in Sec. 4.100-3 and Sec. 4.102-2 (c) shall require prior
application with the Revenue District Office for effective zero-rating. Without an
approved application for effective zero-rating, the transaction otherwise entitled to
zero-rating shall be considered exempt.
SECTION 4.107-2. Non-VAT Registration. — Every person, other

than those required to be registered as VAT persons, engaged in any business, shall,
on or before the commencement of his business, or whenever he transfers to another
revenue district, register with the Revenue District Office concerned within 10 days
from the commencement of business or transfer in the manner prescribed under
SECTION 4.107-1 and shall pay the applicable registration fee for every
separate or distinct establishment or place of business. The fee shall be paid to any
accredited bank, where each place of business or branch is situated. In areas where
there is no accredited bank, such person shall pay the fee prescribed herein with the
Revenue District Officer, collection agent, or authorized municipal treasurer. The
registration shall contain his name or style, place of residence, business, the place
where such business is carried on, and such information as may be required by the
Commissioner in the form prescribed therefor.
The following are required to register as non-VAT persons:
1. VAT-exempt persons under Section 103 (a),(b) (c), (d) and (t)
of the Code who did not opt to register as VAT taxpayers;
2. Persons engaged in trade or business, or exercise of profession,

other than those subject to VAT and other percentage taxes under Title V of the
Code;
3. Individuals engaged in business where the gross sales or receipts do

not exceed P100,000.00 during any 12-month period. They are required to
register but will not be made to pay the registration fee of P1,000.00.
4. Non-stock, non-profit organizations and associations engaged in

trade or business whose gross sales or receipts do not exceed P500,000.00 for
any 12-month period.
SECTION 4.107-3. Application for Registration — The application shall

be filed with the Revenue District Office where the principal place of business,
branch, storage place or premises is located, as the case may be, before
commencement of business or production or qualification as a withholding agent. In
the case of storage places, the application shall be filed within thirty (30) days from
the date the aforesaid premises have been used for storage.
In any case, the Commissioner may, for administrative reasons, deny or revoke
any application for registration.
SECTION 4.107-4. Certificate of Registration — The certificate (BIR

Form No. 1556) shall be issued to the applicant by the Revenue District Officer
concerned upon compliance with the requirement for registration.
SECTION 4-107-5. Posting of Registration Certificate — Every

registered taxpayer shall post or exhibit his Registration Certificate and duly validated
Registration Fee Return at a conspicuous place in his principal place of business and
at each branch in such a way that is clearly and easily visible to the public.
SECTION 4.107-6. Cancellation of Registration — Any subsequent

major change in the original registration shall be effected by filing a duly
accomplished Application For Cancellation of Registration (BIR Form 1557) with the
Revenue District Officer concerned.
Some instances where a VAT-registered person may apply for cancellation of

registration are:
1. A person has retired from business;
2. A person's business has become exempt in accordance with Section

4.100-5(b) of these regulations,
3. A change in the nature of the business itself from sale of taxable

goods and/or services to exempt sales and/or services;
4. A change of ownership, in the case of a single proprietorship;
5. Dissolution of a partnership or corporation;
6. Merger or consolidation with respect to the dissolved

corporation(s);
7. A person who has registered prior to planned business

commencement, fails to actually start his business;
8. A person whose transactions are exempt from VAT under section

103(a), (b), (c), (d) and (t) who voluntarily registered under
the VAT system, who after the lapse of two years, applies for
cancellation of his registration as such;
9. A VAT registered person whose gross sales or receipts for two

consecutive years did not exceed P500,000.00; and
10. A VAT-registered person whose gross sales or receipts did not

exceed P500,000.00 during his first 12 months in business.
Upon cancellation of registration under (9) and (10) above, the taxpayer shall
become liable to the percentage tax imposed in Section 112 of the Code. A
final VAT return for the remaining period that he was registered shall be filed within
twenty (20) days from the date of cancellation of his registration.
For purposes of the percentage tax, the taxpayer shall file quarterly return
corresponding to the quarter of the taxable year adopted by him for income tax
purposes. An initial return shall be filed corresponding to the period from the date of
cancellation of his registration up to the end of his initial quarter.
All applications for cancellation of registration due to closure/cessation or

termination of business shall be subjected to immediate investigation by the RDO
concerned to determine the taxpayer's tax liabilities.
Any minor change in the original registration (such as change of address

within the same RDO, typographical errors, and etc.) which may not necessitate
cancellation of the registration shall be effected by accomplishing the Registration
Change Form.
VAT INVOICE OR RECEIPT
SECTION 4.108-1. Invoicing Requirements — All VAT-registered

persons shall, for every sale or lease of goods or properties or services, issue duly
registered receipts or sales or commercial invoices which must show:
1. the name, TIN and address of seller;
2. date of transaction;
3. quantity, unit cost and description of merchandise or nature of

service;
4. the name, TIN, business style, if any, and address of the

VAT-registered purchaser, customer or client;
5. the word "zero rated" imprinted on the invoice covering zero-rated

sales; and
6. the invoice value or consideration.
In the case of sale of real property subject to VAT and where the zonal or
market value is higher than the actual consideration, the VAT shall be separately
indicated in the invoice or receipt.
Only VAT-registered persons are required to print their TIN followed by the
word "VAT" in their invoice or receipts and this shall be considered as a "VAT
Invoice". All purchases covered by invoices other than "VAT" Invoice" shall not give
rise to any input tax.
If the taxable person is also engaged in exempt operations, he should issue

separate invoices or receipts for the taxable and exempt operations. A "VAT Invoice"
shall be issued only for sales of goods, properties or services subject to VAT imposed
in Sections 100 and 102 of the Code.
The invoice or receipt shall be prepared at least in duplicate, the original to be

given to the buyer and the duplicate to be retained by the seller as part of his
accounting records.
SECTION 4-108-2. Invoicing and recording "deemed sale transactions".

— In the case of Section 4.100-a (A) of these Regulations, a memorandum entry in
the subsidiary sales journal to record withdrawal of goods for personal use is required.
In the case of Section 4.100-4(B) and (C) of these Regulations, an invoice shall be
prepared at the time of the occurrence of the transaction, which should include, all the
information prescribed in Sec. 4.108-1. The data appearing in the invoice shall be
duly recorded in the subsidiary sales journal. The total amount of "deemed sale" shall
be included in the return to be filed for the month or quarter.
In the case of Sec. 4.100-4(D) an inventory shall be prepared and submitted to

the Revenue District Officer who has jurisdiction over the taxpayer's principal place
of business not later than 30 days after retirement or cessation from business.
An invoice shall be prepared for the entire inventory, which shall be the basis
of the entry into the subsidiary sales journal. The invoice need not enumerate the
specific items appearing in the inventory, but it must show the total amount. It is
sufficient to just make a reference to the inventory regarding the description of the
goods. However, the sale invoice number should be indicated in the inventory filed
and a copy thereof shall form part of this invoice. If the business is to be continued by
the new owners or successors, the entire amount of output tax on the amount deemed
sold shall be allowed as output taxes. If the business is to be liquidated and the goods
in the inventory are sold or disposed of to VAT-registered buyers, an invoice or
instrument of sale or transfer shall to prepared citing the invoice number wherein the
tax was imposed on the deemed sale. At the same time the tax paid corresponding to
the goods sold should be separately indicated in the instrument of sale.
SECTION 4.108-3. Accounting requirements. — Notwithstanding the

provisions of Section 233, all persons subject to VAT under Sections 100
and 102 of the Code shall, in addition to the regular accounting records
required, maintain a subsidiary sales journal and subsidiary purchase journal on which
the daily sales and purchases are recorded. The subsidiary journal shall contain such
information as may be required by the Commissioner of Internal Revenue.
SECTION 4.109-1. Change of address or principal place of business. —

Whenever a VAT-registered person changes his principal place of business, he should
file a notice in the prescribed form within fifteen (15) days from the date such change
was made. If the change of address is within the revenue district, the notification shall
be filed with the Revenue District Officer in that district. However, if the change of
address is from one revenue district to another revenue district, both Revenue District
Officers should be notified by filing an application for cancellation with the former
and a new application for registration with the latter. In the case of change of place of
business of branches or creation of a new branch, the Revenue District Officer where
his principal place of business is situated shall be notified.
SECTION 4.110-1. Filing of return and payment of VAT. —
A) Filing of Return — Every person liable to pay VAT shall file a

quarterly return of the amount of his gross sales or receipts within twenty (20) days
following the close of calendar quarter.
B) Payment of VAT. — All persons liable to VAT shall pay the tax
monthly based on the taxable sales/receipts for the month, using the monthly VAT
declaration form within twenty five (25) days after the end of the month. The
declaration shall be accomplished only for the first two months of each calendar
quarter.
The VAT payable (output tax less input tax) for each calendar quarter shall be
reduced by the total amount of the tax(es) previously paid for the preceding two
months and/or the sum of the excess input taxes allowed under Title IV of the Code.
C) Short Period Return. — Any person who retires from business or whose
registration has been cancelled shall file a final quarterly return and pay the tax due
thereon within twenty (20) days from the end of the quarter when the business
ceased operation and the registration officially cancelled. Thus, if a taxpayer's
Certificate of Registration is cancelled on November 30, 1995, he shall file his final
quarterly VAT return and pay the tax on or before January 20, 1996.
All persons first registered under Section 4.107-1(b)(3) and 4.107-1 (c) of
these Regulations shall be liable to VAT on the effective date of registration stated in
their Certificates of Registration; i.e., the first day of the month following their
registration. If the effective date of registration falls on the first or second month of a
calendar quarter, initial VAT monthly declaration shall be filed within twenty five
(25) days after the end of the month, and the initial quarterly return shall be
filed on or before the 20th day after the end of the calendar quarter. On the
other hand, if the effective date of registration falls on the third month of the calendar
quarter, the quarterly return shall be filed on or before the 20th day of the
month following the end of the quarter, and no VAT monthly declaration need be
filed.
D) Where to file and pay. — The monthly VAT declaration and

quarterly return shall be filed with, and the VAT due thereon paid to, a bank duly
accredited by the Commissioner located in the revenue district where such person is
registered or required to be registered.
In cases where there are no duly accredited agent banks within the municipality
or city, the monthly VAT declaration and quarterly VAT return, shall be filed with the
and any amount due shall be paid to the Revenue District Officer, Collection Agent or
duly authorized Treasurer of the Municipality where such taxpayer has his principal
place of business.
In areas where there are accredited banks, the quarterly VAT return, where no
payment is involved shall be filed with any accredited bank in the Revenue District
where the principal place of business of the taxpayer is registered. However, the
monthly VAT declaration, where no payment is involved, shall be filed with the
Revenue District Officer where the principal place of business of the taxpayer is
registered.
SECTION 4.110-2. Indication of Taxpayer Identification Number (TIN)

— For tax identification purposes, any person required under the authority of
the Code to make, render, or file a return, statement, or a document, shall be supplied
with or assigned a TIN, which shall be indicated on such return, statement or
document.
Any person who shall secure more than one TIN or who fails to indicate his
correct TIN as required in the foregoing paragraph, shall be criminally liable under
the provision of Section 274 of the Code.
SECTION 4.110-3. Withholding of Creditable Value-Added Tax.

— (a) The government or any of its political subdivisions, instrumentalities or
agencies, including government-owned or controlled corporations (GOCCs) shall,
before making payment on account of its purchase of goods from sellers and/or
services rendered by contractors which are subject to the VAT imposed in Sec. 100
and 102 of the Code, deduct and withhold the VAT due at the rate of
three percent (3%) of the gross payment for the purchase of goods and six percent
(6%) on gross receipts for the services rendered by contractors on every sale or
installment payment which shall be creditable against the VAT liability of the seller
or contractors pursuant to RA 7649 as implemented by Revenue Regulations
No. 10-93; Provided, That payment of P1,000.00 and below per purchase shall
not be subject to withholding tax.
(b) The lessee or licensee, with respect to lease or use of property or property
rights owned by the non-residents, or the local insurance company, with respect to
reinsurance premiums payable to non-resident reinsurance companies, shall, before
making payment, withhold and remit the 10% VAT due thereon by filing a separate
VAT return for and in behalf of the payee.
SECTION 4.111-1. Administrative and penal provisions. (a)

Suspension of business operations. — In addition to other administrative and
penal sanctions provided for in the Code and implementing regulations, the
Commissioner or his duly authorized representative may order suspension or closure
of a business establishment for a period of not less than five (5) days for any of the
following violations:
(1) Failure to issue receipts and invoices.
(2) Failure to file value-added tax return as required under the

provisions of Section 110.
(3) Understatement of taxable sales or receipts by 30% or more of his

correct taxable sales or receipt for the taxable quarter.
(4) Failure of any person to register as required under the provisions of

Sec. 107.
(b) Surcharge, interest and other penalties. — The interest on unpaid amount
of tax, civil penalties and criminal penalties imposed in Title X of the Tax
Code shall also apply to violations of the provisions of Title IV of the Code.
SECTION 4.112-1. Tax On Persons Exempt From VAT. — Any

person whose sales or receipts are exempt under Section 103 (t) of the Code
from payment of VAT and who is not a VAT-registered person shall pay a tax
equivalent to three percent (3%) upon the effectivity of the Act and four percent (4%)
two years thereafter of his gross quarterly sales or receipts.
SECTION 4.112-2. Transactions exempt from VAT and from percentage

tax. — Any individual engaged in business or businesses where the aggregate gross
sales or receipts do not exceed P100,000.00 during any 12-month period shall be
exempt from the payment of VAT and from any percentage tax imposed under the
NIRC.
TRANSITORY PROVISIONS
(a) Presumptive Input Tax Credits —
(i) For goods, materials or supplies not for sale but purchased
for use in business in their present condition, which are not
intended for further processing and are on hand as of
December 31, 1995, a presumptive input tax equivalent to
8% of the value of the goods or properties shall be allowed.
(ii) For goods or properties purchased with the object of resale

in their present condition, the same presumptive input tax
equivalent to 8% of the value of the goods unused as of
December 31, 1995 shall be allowed, which amount may
also be credited against the output tax of a VAT-registered
person.
(iii) For real estate dealers, the presumptive input tax of 8% of

the book value of improvements constructed on or after
January 1, 1988 (the effectivity of E.O. 273) shall be
allowed.
For purposes of sub-paragraph (i), (ii) and (iii) above, an inventory as of

December 31, 1995 of such goods or properties and improvements showing the
quantity, description, and amount should be filed with the RDO not later than January
31, 1996.
In recognizing presumptive input tax as of December 31, 1995, a journal entry

should be made in the books debiting the input tax account and crediting the inventory
account.
(b) Registration and Payment of Registration Fee. — All VAT and non-VAT
taxpayers are required to register anew under these Regulations not later than January
31, 1996 and pay the applicable registration fee.
During the transitory period, the following guidelines shall be followed:
i) VAT taxpayers under E.O. 273 (Old Law). — Those who
have not registered under RMO 41-94 are required to
register as VAT taxpayers not later than January 31, 1996 and pay
the applicable registration fee. However, those who already
registered need not register anew, in which case, the registration
fee already paid shall be automatically credited against the 1996
annual registration fee.
ii) Non-VAT taxpayers becoming liable to VAT under RA 7716.

— Those who have not registered under RMO 41-94 are
required to register as VAT taxpayers not later than January 31,
1996 and pay the applicable registration fee. However, those who
already registered need no register anew, in which case, the
registration fee already paid shall be automatically credited against
the 1996 annual registration fee.
iii) VAT taxpayers who cease to become VAT liable under RA 7716.
— These who have not applied for cancellation of their VAT
registration and have not register as Non-VAT taxpayer shall apply
for cancellation of their VAT registration, register as Non-VAT
taxpayer and pay the applicable registration fee. However, those
who have already applied for cancellation of their VAT registration
and registered as Non-VAT taxpayer need not register anew, in
which case, the registration fee already paid shall be automatically
credited against the 1996 annual registration fee.
iv) Other Non-VAT taxpayer including those enjoying deferment

under Sec. 17, of RA 7716. — Those who failed to register under
RMO 41-94, shall register as Non-VAT taxpayer not later than
January 31, 1996. However, those who have registered need not
register anew, in which case, the registration fee already paid shall
be automatically credited against the 1996 annual registration fee.
Taxpayers who have registered as VAT/Non-VAT taxpayer under RMO 41-94

and subsequently cancelled the same as consequence of the Temporary Restraining
Order shall register again as VAT/Non-VAT taxpayer not later than January 31, 1996.
(c) Unused invoices or receipts. — Taxpayers who changed status from

NON-VAT to VAT or from VAT to NON-VAT as a result of the implementation of
RA 7716 should submit on or before January 31, 1996 an inventory of unused
invoices or receipts as of December 31, 1995 indicating the number of booklets and
the corresponding serial numbers. Unused non-VAT invoices/receipts shall be
allowed for use in transactions subject to VAT provided the phrase "VAT-registered
as of __________" is stamped on all copies thereof. Likewise, unused VAT
invoices/receipts shall be allowed in VAT-exempt transactions provided the phrase
"Non-VAT registered as of __________" is stamped on all copies thereof. These
unused invoices or receipts with the proper stamp shall be allowed for use in
transactions subject to VAT/NON-VAT up to June 30, 1996.
(d) Billed but uncollected sale of services. — Amounts due on sale of

services becoming liable to VAT under RA 7716 rendered on or before December 31,
1995, payments of which are receivable on or after January 1, 1996, shall be
considered as accrued as of December 31, 1995 for the purpose of VAT exemption
and payment of any applicable percentage tax subject to the following conditions:
(i) An information return shall be filed showing the name(s) of the

contractee(s), client(s), customer(s) and the amount(s) of the
contract price outstanding as of December 31, 1995, and
containing a declaration of the obligation to pay the applicable
percentage tax due, if any;
(ii) The seller billed the unpaid amount not later than December 31,
1995, and a copy of such billing is attached to the information
return required in (i) hereof;
(iii) The seller has recorded in his books of accounts for the year 1995
the amount receivable; and
(iv) The seller files not later than January 20, 1996, or on or before the
20th day after each calendar quarter, the regular percentage tax
return for the payment of the percentage tax on payments received
in 1996.
Failure to comply with the above-stated conditions shall automatically subject

the gross receipts to the value added tax.
(e) Penalties. — Those who, pursuant to RA 7716, are engaged in transaction

subject to VAT but failed to register shall nevertheless be liable to output VAT
starting January 1, 1996. They cannot pass on the said output VAT to their customers
nor claim input VAT credit for purchase of goods, properties and services from
VAT-registered suppliers. Moreover, buyers cannot claim input tax credit for
purchases of goods from VAT-registrable sellers who failed to register.
(f) Tax credit on overpayment of registration fee of P1,000.00. — Those who

have overpaid their registration fee shall be allowed an automatic tax credit against
their succeeding years registration fee upon presentation of proof of payment.
(g) Importation. — Importation of goods previously exempt but are now

subject to VAT under RA 7716 shall, upon withdrawal from customs custody on or
after January 1, 1996, be subject to VAT. On the other hand, importation of goods
previously taxable but are now exempt under RA 7716 shall, upon withdrawal from
customs custody on or after January 1, 1996, be exempt from VAT.
Repealing Clause. — All regulations, rulings, orders or portions thereof which

are inconsistent with the provisions of these regulations are hereby revoked and/or
amended.
RA. No. 7716 expressly repealed certain paragraph of Article 39 of Executive

Order No. 226, otherwise known as the Omnibus Investment Code of 1987, to
wit:
1. "Paragraph (c)" which refers to exemption from customs duty and

tax on imported capital equipment;
2. "Paragraph (d)" which refers to tax credit on domestic capital

equipment; and
3. "Paragraph (e)" which refers to exemptions on contractor's tax

(now VAT).
Enterprises registered with BOI under EO 226, as amended by RA 7918,

on or before December 31, 1994 shall continue to enjoy the above benefits and
incentives. However, enterprises registered with BOI after December 31, 1994, shall
no longer enjoy the above incentives starting January 1, 1996.
Effectivity. — These Regulations shall take effect fifteen (15) days after
publication in a newspaper of general circulation in the Philippines. Provided,
however, that the provisions of these Regulations shall be implemented beginning
January 1, 1996.
ROBERTO F. DE OCAMPO
Secretary of Finance
Recommending Approval:
LIWAYWAY VINZONS-CHATO
Commissioner of Internal Revenue
Executive Order No. 273 (VAT) Republic Act No. 7716 (EVAT)
Sec. 99. Persons Liable. Any person who, Sec. 99. Persons Liable — Any person
in the course of trade or business, sells, who, in the course of trade or business,
barters or exchanges goods, renders sells, barters, exchanges, leases goods or
services, or engaged in similar transactions properties, renders services, and any
and any person who imports goods shall person who imports goods shall be liable to
be subject to VAT imposed in Sec. the VAT imposed in Sec. 100 to
100 to 102 of this Code. 102 of this Code.
The VAT is an indirect tax and the amount

of tax may be shifted or passed on to the
buyer, transferee or lessee of the goods,
properties or services. This rule shall
likewise apply to existing contracts of sale
or lease of goods, properties or services at
the time of the effectivity of this Act.
The phrase 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, non-profit private
organization (irrespective of the disposition
of its net income and whether or not it sells
exclusively to members or their guests), or
government entity.
The rule of regularity, to the contrary,

notwithstanding, services as defined in this
Code rendered in the Phils. by nonresident
foreign persons shall be considered as being
rendered in the course of trade or business.
Sec. 100. Value added tax on goods. — Sec. 100 Value-added tax on sale of
a) Rate and base of tax. There shall goods or properties. — a) Rate and base
be levied, assessed and collected on every of tax. — There shall be levied, assessed
sale, barter or exchange of goods, a VAT and collected on every sale, barter or
equivalent to 10% of the gross selling price exchange of goods or properties, a
or gross value in money of the goods sold, VAT equivalent to 10% of the gross selling
bartered or exchanged, such tax to be paid price or gross value in money of the goods
by the seller or transferor, Provided, that or properties sold, bartered or exchange,
the following sales by VAT-registered such tax to be paid by the seller or
persons shall be subject to 0%. transferor.
1) export sales; and 1) The term 'goods or properties'

2) sales to persons or entities shall mean all tangible and intangible
whose exemption under special laws or objects which are capable of pecuniary
international agreements to which the Phils. estimation and shall include:
is a signatory effectively subjects such sale a) Real properties held primarily for
to zero rate. sale to customers or held for lease
in the ordinary course of trade or business;
'Export sales' means the sale and b) The right or the privilege to use patent,
shipment or exportation of goods from copyright, design or model, plan, secret
the Phils. to a foreign country, formula or process, goodwill, trademark,
irrespective of any shipping trade brand or other like property or right;
arrangement that may be agreed upon c) The right or the privilege to use in the
which may influence or determine the Phils. of any industrial, commercial or
transfer of ownership of the goods scientific equipment;
so exported, or foreign currency
denominated sales. d) The right or the privilege to use
motion picture films, tapes, and discs, and
'GOODS' means any movable, tangible e) Radio, television, satellite transmission
objects which is appropriable or and cable television time.
transferrable. (RR 5-87)
The term 'gross selling price' means 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 the VAT. The excise
tax, if any on such goods or properties shall
form part of the gross selling price.
2) The following sales by VAT-registered

persons shall be subject to 0%:
A) Export sales — The term 'export sales'

means:
I) 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 and
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 Bangko
Sentral ng Pilipinas (BSP).
b) Transactions deemed sale. — b) Transactions deemed sale. — The

The following transactions shall be following transactions shall be deemed sale;
deemed sale; 1) Transfer, use or consumption noting
1) Transfer, use or consumption the course of business of goods or
not in the course of business of goods properties originally intended for sale or for
originality intended for sale or for use use in the course of business.
in the course of business. 2) Distribution or transfer to:
2) Distribution or transfer to: a) shareholders or investors as share
a) shareholders or investors in the profits of the VAT-registered
as share in the profits of the VAT persons; or
registered person; or b) Creditors in payment of debt.
b) creditors in payment of debt 3) Consignment of goods if actual sale
3) Consignment of goods if actual is not made within 60 days following
sale is into made within 60 days following the date such goods were consigned.
the date such goods were consigned. 4) Retirement from or cessation of
4) Retirement from or cessation business, with respect to inventories of
of business, with respect to inventories taxable goods existing as of such
of taxable goods existing as of such retirement or cessation.
retirement or cessation.
c) Changes in cessation of status c) Changes in cessation of status of

of a VAT-registered person. — The a VAT-registered person. — The tax
tax imposed in paragraph (a) of this imposed in par. (a) of this section shall
Section shall also apply to goods also apply to goods disposed of or existing
disposed of or existing as of a certain as of a certain date if under circumstances
date if under circumstances to be to be prescribed in regulations to be
prescribed in Regulations to be promulgated by the Secretary of Finance,
promulgated by the Sec. of Finance, the status of a person as a VAT-registered
the status of a person as a person changes or is terminated.
VAT-registered person changes
or is terminated. d) Determination of the tax. — (1) The
tax shall be computed by multiplying the
d) Determination of the tax. — total amount indicated in the invoice by
1) Tax billed as a separate item in 1/11.
the invoice. — If the tax is billed as a (2) Sales returns, allowances and sales
separate item in the invoice, the tax discounts. — The value of goods or
shall be based on the gross selling price, properties sold and subsequently returned
excluding the tax. 'Gross selling price' or for which allowances were granted by a
means the total amount of money or VAT-registered person may be deducted
its equivalent which the purchaser from the gross sales or receipts for the
pays or is obligated to pay to the quarter in which a refund is made or a
seller in consideration of the sale, credit memorandum or refund is issued.
barter or exchange of the goods, Sales discount granted and indicated in
excluding the VAT. The excise tax, the invoice at the time of sale and the
if any, on such goods shall form grant of which does not depend upon the
part of the GSP. happening of a future event may be
excluded from the gross sales within the
same quarter it was given.
(3) Authority of the Commissioner to

determine the appropriate tax base. — The
Commissioner shall, by regulation,
determine the appropriate tax base in cases
where a may influence or determine the
transfer of ownership of the goods so
exported and 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
Bangko Sentral ng Pilipinas (BSP);
ii) Sale of raw materials or packaging
materials to a nonresidents buyer of
delivery to a resident local export-oriented
enterprise to be used in manufacturing,
processing, packing or repacking in the
Phils. 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;
iii) Sale of raw materials or packaging
materials to export oriented enterprise
whose export sales exceed seventy percent
of total annual production;
iv) Sale of gold to the BSP;
v) Those considered export sales
under EO No. 226, otherwise known as the
Omnibus Investment Code of 1987 and
other special laws.
'Foreign currency denominated sales' B) Foreign currency denominated sale.

means sales to nonresidents of goods The phrase foreign currency denominated
assembled or manufactured in the Phils., sale' means sale to a nonresident of goods,
for delivery to residents in the Phils. and except those mentioned in Sec. 149 and
paid for in convertible foreign currency 150, assembled or manufactured in the
remitted through the banking system Phils. for delivery to a resident in the
in the Phils. Phils., paid for in acceptable foreign
currency and accounted for in accordance
with the rules and regulations of the BSP.
C) Sales to persons or entities whose

exemption under special laws or
international agreements to which the Phils
is a signatory effectively subjects such sales
to zero-rate, transaction is deemed a sale,
barter or exchange of goods or properties
under par. (b) hereof, or where the gross
selling price is unreasonably lower than the
actual market value.
Sec. 101. Value-added tax on importation Sec. 101. SAME

of goods. — (a) In general. — There shall
be levied, assessed, and collected on every
importation of goods a VAT equivalent to
10% based on 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,
such tax to be paid by the importer prior
to the release of such goods from customs
custody: Provided, that where the customs
duties are determined on the basis of the
quantity or volume of the goods, the VAT
shall be based on the landed cost plus excise
taxes, if any.
(b) Transfer of goods by tax-exempt
persons. — In the case of tax-free
importation of goods into the Phils. by
persons, entities or agencies exempt from
tax where such goods are subsequently
sold, transferred or exchanged in the Phils.
to non-exempt persons or entities, the
purchasers, transferees or recipients shall
be considered the importers thereof who
shall be liable for any internal revenue tax
on such 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.
Sec. 102. Value-added tax on sale of Sec. 102. Value-added tax on sale of
services. — (a) Rate and base of tax. — services and use or lease of properties. —
There shall be levied, assessed and (a) Rate and base of tax. — There
collected a VAT equivalent to 10% shall be levied, assessed and collected
of gross receipts derived by any person a VAT equivalent to 10% of gross
engaged in the sale of services. The receipts derived from the sale or exchange
phrase 'sale of services' means the of services, including the use or lease
performance of all kinds of services for of properties.
others for a fee, remuneration or
consideration, including those performed The phrase "sale or exchange of
or rendered by construction and service services" means the performance of
contractors; stock, real estate, all kinds of services in the Phils. for
commercial, others for a fee, remuneration or
customs and immigration brokers; consideration, including those performed or
lessors of personal property; lessors or rendered by construction; and service
distributors of cinematographic films; contractors; stock, real estate, commercial,
persons engaged in milling, processing, customs and immigration brokers; lessors
manufacturing or repacking goods for of property, whether personal or real;
other; and similar services regardless warehousing services; lessors or
of whether or not the performance distributors of cinematographic films;
thereof calls for the exercise or use persons engaged in milling, processing,
the physical or mental faculties; manufacturing or repacking goods for
Provided, That the following services other, proprietors, operators or keepers
performed in the Phils. by VAT- of hotels, motels, resthouses, pension
registered persons shall be subject to 0%: houses, in as, resorts; proprietors or
operators of restaurants, refreshment
1) Processing, manufacturing or parlors, cafes and other eating places
repacking goods for other persons doing including clubs and caterers; dealers in
business outside the Phils. which goods securities; lending investors; operators
are subsequently exported, where the of taxicabs; utility cars for rent or hire
services are paid for in acceptable driven by the lessees (rent a car
foreign currency, inwardly remitted to companies), tourist buses; and other
the Phils. and accounted for in common carriers by land, air,
accordance with the rules and and sea relative to their transport
regulations of the Central Bank. of goods or cargoes; services of
2) Services other than those franchise grantees of telephone
mentioned in the proceeding sub and telegraph, radio and television
-paragraph, the consideration for broadcasting and all other franchise
which is paid for in acceptable grantees except those under Section
foreign currency which is remitted 117 of this Code; services of banks,
inwardly to the Phils. and accounted non-bank financial intermediaries and
for in accordance with the rules and finance companies; and non-life
regulations of the CB. insurance companies (except their
3) Services rendered to persons or crop insurance) including surety,
entities whose exemption under special fidelity, indemnity and bonding companies;
laws or international agreement to and similar services regardless of whether
which the Phils. is a signatory effectively or not the performance thereof calls for
subjects the supply of such services to the exercise or use of the physical or
zero rate. mental faculties. The phrase 'sale or
exchange of services' shall likewise include:
"Gross receipts" means the total 1) The lease or the use of or the right
amount of money or its equivalent or privilege to use any copyright,
representing the contract price, patent, design or model, plan, secret
compensation or service fee, including formula or process, goodwill, trademark,
the amount charged for materials supplied trade brand or other like property or right;
with the services and deposits or advance 2) The lease or the use of, or the right
payments actually or constructively to use of any industrial, commercial
received during the taxable quarter or scientific equipment;
for the services performed or to be 3) The supply of scientific, technical,
performed for another person, excluding industrial or commercial knowledge
VAT. or information;
(b) Determination of the tax. — (1) 4) The supply of any assistance that
Tax billed as a separate item in the is ancillary and subsidiary to and is
invoice. — If the tax is billed as a separate furnished as a means of enabling the
item in the invoice, the tax shall be application or enjoyment of any such
based on the gross receipts, including property or right as is mentioned in
the tax. subpar. (2) or any such knowledge
(2) Tax not billed separately or or information as is mentioned in sub-par.
is billed erroneously in the invoice. 3; or
If the tax is not billed separately or 5) The supply of services by a
is billed erroneously in the nonresident person or his employee is
invoice, the tax shall be determined connection with the use of property or
by multiplying the gross receipts rights belonging to, or the installation
(including the amount intended to or operation of any brand, machinery,
cover the tax or the tax billed or other apparatus purchased from such
erroneously) by 1/11. 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; and
8) The lease or the use of or the right to
use radio, television, satellite transmission
and cable television time.
"Lease of properties shall be subject to

the tax herein imposed irrespective of the
place where the contract of lease or
licensing agreement was executed if the
property is leased or used in the Phils.
The term "gross receipts" means 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 and advanced payments actually
or constructively received during the
taxable quarter for the services performed
or to be performed for another person,
excluding VAT.
(b) Transactions subject to zero-rate.
— The following services performed in the
Phils. by VAT-registered persons shall be
subject to 0%:
1) Processing manufacturing or repacking

goods for other persons doing business
outside the Phils. 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 BSP.
2) Service other than those mentioned in

the preceding sub-paragraph, the
consideration for which is paid for in
acceptable foreign currency and accounted
for in accordance with the rules and
regulations of the BSP/
3) Services rendered to persons or entities
whose exemption under special laws or
international agreements to which the Phils.
is a signatory effectively subjects the
supply of such services to zero rate.
4) Services rendered to vessels engaged
exclusively in international shipping; and
5) Services performed by subcontractors
and/or contractors in processing,
converting, or manufacturing goods for an
enterprise whose export sales exceed
seventy percent (70%) of total annual
production.
c) Determination of the tax. — The
tax shall be computed by multiplying the
total amount indicated in the official receipt
by 1/11.
Sec. 103. Exempt Transactions. — Sec. 103 Exempt Transactions. —

The following shall be exempt from the The following shall be exempt from
value-added tax: the VAT:
a) Sale of nonfood agricultural, marine a) SAME
and forest products in their original state
by the primary producer or the owner
of the land where the same are produced.
b) Sale or importation in their original b) Sale of cotton and cotton seeds in
state of agricultural and marine food their original state; and copra
products; livestock and poultry of a c) Sale or importation of agricultural
kind generally used as, or yielding or and marine food products in their
producing food for human consumption; original state, exempt importation
and breeding stock and genetic materials of meat, livestock and poultry of a
therefor. kind generally used as, or yielding or
producing foods for human consumption;
Products classified under this par. and breeding stock and genetic materials
and par. (a) shall be considered in their therefor.
original state even if they have
undergone the simple processes of Products classified under this par. and
preparation or preservation for the par. (a) shall be considered in their
market, such as freezing, drying, original state even if they have undergone
salting, smoking or stripping. Polished the simple processes of preparation or
and/or husked rice, corn grits and raw preservation for the market, such as
cane sugar shall be considered in their freezing, drying, salting, smoking or
original state for purposes of this par. stripping. Polished and/or husked rice, corn
c) Sale or importation of fertilizer, grits, locally produced raw cane sugar and
pesticides and herbicides, chemicals ordinary salt shall considered in their
for the formulation of pesticides; seed, original state;
seedlings and fingerlings; fish, animal d) Sale or importation of fertilizers; seeds,
and poultry feeds; and soya bean and seedlings, fingerlings; fish, prawn, livestock
fish meals; and poultry feeds, including ingredients,
d) Sale or importation of petroleum whether locally produced or imported,
products (exempt lubricating oil, used in the manufacture of finished feeds
processed gas, grease, wax and (except specially feeds for horses,
petroleum) subject to excise tax, fighting cocks, aquarium fish, zoo animals
imposed under Title VI; and other animals generally considered as
e) Sale or importation of raw pets);
materials to be used by the buyer or e) Sale or importation of petroleum
importer himself in the manufacture products (except lubricating oil,
of petroleum products (except processed gas, grease, wax and
lubricating oil and grease) subject petroleum) subject to excise tax imposed
to excise tax. under Title VI;
f) Printing, publication, importation or f) Sale or importation of raw materials
sale of books and any newspaper, to be used by the buyer or importer
magazine, review or bulletin which himself in the manufacture of
appears at regular intervals with petroleum products subject to excise
fixed prices for subscription and tax, except lubricating oil, processed
sale and which is not devoted gas, grease, wax and petrolatum;
principally to the publication of g) Importation of passenger and/or
advertisement; cargo vessel of more than five
g) Importation of passenger thousand tons, whether coastwise or
and/or cargo vessels of more than ocean-going including engine and
ten thousand tons, whether coastwise spare parts of the said vessel to be
or ocean-going, including engine thereof; (SAME)
and spare parts of said vessel, to
be used by the importer himself as
operator thereof;
h) Importation of personal and h) SAME
household effects belonging to
residents of the Phils. returning from
abroad and non-resident citizens
coming to resettle in the Phils.
Provided, that such goods are exempt
from custom duty under the Tariff
and Customs Code of the Phils.
i) Importation of professional i) SAME
instruments and implements,
wearing apparel, domestic animals,
and personal household effects
(except any vehicle, vessel, aircraft,
machinery, other goods for use in
manufacture and merchandise of any
kind in commercial quantity) belonging
to persons coming to settle for the
first time in the Phils. of their own
use and not for sale, barter, or
exchange, accompanying such
persons, or arriving within ninety
days before or after their arrival,
upon the production of evidence
satisfactory to the CIR, that such
persons are actually coming to
settle in the Phils. and that the
change of residence is bona fide;
j) Services rendered by person j) SAME
subject to percentage tax under V;
k) Services by agricultural contract k) SAME
growers and milling for other of palay
into rice, corn into grist and sugar cane
into raw sugar,
l) Medical, dental, hospital and l) Medical, dental, hospital and veterinary
veterinary services; services except those rendered by
professionals;
m) Educational services rendered m) SAME
by private educational institutions,
duly accredited by the DECS, and
those rendered by government
educational institutions;
n) Sale by the artist himself of his n) SAME
works of art, literary works, musical
compositions and similar creations, or
his services performed for the production
of such works;
o) Services performed as actor, actresses, o) Services rendered by individuals
talents, singers and emcees; radio and pursuant to an employer-employee
television broadcaster, choreographers; relationship;
musical, radio, movie, television and
directors;
p) Service performed as professional
athlete;
q) Leasing of real property;
r) Services performed in the exercise
of profession or calling (except customs
brokers) subject to the occupation tax
under the Local Tax Code, and
professional services performed by
registered general professional
partnership;
s) Services rendered by individuals o) SAME
pursuant to an employer-employee
relationship
t) Services rendered by regional or p) SAME
area headquarters established in the q) Transactions which are exempt
Phils. by multinational corp. which under special laws, except those
act as supervisory, communications granted under PD Nos. 66, 529, 927,
and coordinating centers for their 1491 and 1590 and non-electric
affiliates, subsidiaries or branches cooperatives under RA No. 6938 or
in the Asia-Pacific Region and do international agreements to which the
not earn or derive income from the Phils. is a signatory;
Phils;
u) Transactions which are exempt
under special laws or international
agreements to which the Phils. is
a signatory;
v) export sales by persons who r) SAME
are not VAT-registered; and s) Sale or real properties not
w) Sales and/or services performed primarily held for sale to customers or
by persons other than those held for lease in the ordinary course
mentioned the preceding paragraphs of trade or business or real property
whose annual gross sales and/or utilized for law-cost and socialized
receipts do not exceed the amount housing as defined by RA No. 7279
prescribed in regulations to be otherwise known as Urban Dev. and
promulgated by Sec. of Finance Housing Act of 1992, and other related
which shall not be less than laws;
P100,000.00 or higher than t) Sale or lease of goods or properties
P500,000.00. or the performance of services other
than the transactions mentioned in the
preceding pars., the gross annual sales
and/or receipts donor exceed the amount
prescribed in regulations to be promulgated
by the Pres. upon the recommendation by
the Sec. of Finance which shall not be less
than P480,000.00 or more than
P720,000.00 subject to tax under Sec. 112
of this Code.
The foregoing exemptions to the contrary

notwithstanding, any person whose sale of
goods or properties or services which are
otherwise not subject to VAT, but who
issues a VAT invoice or receipt therefore
shall, in addition to his liability to other
applicable percentage tax, if any be liable to
the tax imposed in Sec. 100 or 102 without
the benefit of input tax credit to the
purchaser under Sec. 104 of this Code.
Sec. 104. Tax Credits — (a) Sec. 104. Tax Credits — (a)
Creditable input tax — Any input Creditable input tax. — Any
tax on the: input tax evidenced by a VAT
(1) purchase or importation of goods: invoice or official receipt issued in
a) for sale or for conversion into accordance with Sec. 108 hereof on the
or intended to form part of a finished ff. transactions shall be creditable
products for sale or for use in the against the output tax:
course of business; or (1) Purchase or importation of goods:
b) for use a supplies in the course a) For sale; or
of business; b) For conversion into or intended
c) for use as materials supplied to form part of a finished product
in the sale of service; or for sale including packaging materials; or
d) for use in trade or business for c) For use as supplies in the course
which deduction for depreciation is of business; or
allowed under Sec. 29(1) of this d) For use as materials supplied in
Code; and the sale of service; or
(2) Services performed by a e) for use in trade or business
VAT-registered person shall be credited for which deduction for depreciation
against the output tax payable by the or an amortization is allowed under this
VAT registered person; Provided, Code, except automobiles, aircrafts
that in the case of a domestic and yachts.
purchase of goods or services, (2) Purchase of services on which a
the invoice or receipt was issued VAT has been actually paid.
therefor by a VAT-registered person
in a manner prescribed in Section 108. "The input tax on domestic purchase
of goods or properties shall be creditable:
A VAT-registered person who is AA) To the purchaser upon

also engaged in transactions not consumption of sale and on importation of
subject to the VAT shall be allowed goods or properties
tax credit as follows:
(A) Total input tax which can be (BB) To the importer upon payment
directly attributed to transactions of the VAT prior to the release of the
subject to VAT; and goods from the custody of the Bureau
B) A ratable portion of any input of Customs.
tax which cannot be directly attributed
to either activity. However, in the case of purchaser of
"Input tax" means the value-added services, lease or use of properties the
tax paid by a VAT-registered person input tax shall be creditable to the
in the course of his trade or business purchaser, lessee or licensee upon
on importation of goods or services payment of the compensation, rental,
from a VAT-registered person. It royalty or fee.
shall also include the transitional input
tax determined accordance with Sec. A VAT-registered person who is also
105 of this Code and other transitional engaged in transactions not subject to
input taxes as prescribed by regulations. VAT shall be allowed input tax as follows:
a) Total input tax which can be
In case tax exempt products of directly attributed to transactions subject
a pioneer enterprise registered with to VAT; and
the BOI as of Aug. 1, 1986 are sold b) A ratable portion of any input
domestically to VAT-registered person, tax which cannot be directly attributed
the VAT otherwise due on such to either activity.
products shall also be considered as
input tax creditable against the The term "input tax" means the
output tax payable. Value-added tax due from or paid
by a VAT-registered person in the
The term "output tax" means course of his trade or business, on
the VAT due on the sale of taxable importation of goods or local purchase
goods or services by any person of goods or services, including lease
register or required to register under or use of property, from a VAT-
Sec. 107 of this Code. registered person. It shall also include
the transitional input tax determined
(b) Excess output or input tax. — in accordance with Sec. 105 of this Code.
If at the end of any taxable quarter the
output tax exceeds the input tax, the The term "output tax" means
excess shall be paid by the VAT the value-added tax due on the sale
-registered person. If the input tax or lease of taxable goods or properties
exceeds the output tax, the excess or services by any person registered
shall be carried over the succeeding or required to register under Sec. 107
quarter or quarters. Any input tax of this Code.
attributable to the purchase of capital
goods or to zero-rated sales by a (b) Excess output or input tax. —
VAT-registered person may at this If at the end of the any taxable quarter
option be refunded or creditable against the output tax exceeds the input tax,
other internal revenue taxes, subject to the excess shall be paid by the VAT
the provisions of Sec. 106. -registered person. If the input tax exceeds
the output tax, the excess shall be carried
over to the succeeding quarters. Any input
tax attributable to the purchase of capital
goods or to zero-rated sales by a VAT-
registered person may at his option be
refunded or credited against other internal
revenue taxes, subject to the provisions of
Sec. 106.
(c) Determination of creditable input
tax. — The sum of the excess input tax
carried over from the preceding month or
quarter and the input tax creditable to a
VAT-registered person during the taxable
month or quarter shall be reduced by the
amount of claim for refund or tax credit for
VAT and other adjustments, such as
purchase returns or allowances and input
tax attributable to exempt sale.
The claim for tax credit referred to in the
foregoing paragraph shall include not only
those filed with the Bureau of Internal
Revenue but also those filed with the other
government agencies, such as the Board of
Investments (BOI) and the Bureau of
Customs (BOC).
Sec. 105. Transitional input tax SAME

credits. — A person who becomes
liable to value-added tax or any person
who elects to be a VAT-registered
person shall subject to the filing of
inventory as prescribed by regulations,
be allowed input tax on his beginning
inventory of goods, materials and
supplies equivalent to 8% of the value
of such inventory or the actual value-
added tax paid on such goods,
materials and supplies, whichever
is higher, which shall be creditable
against the output tax.
Sec. 106. Refund or tax credits of input Sec. 106. Refunds or tax credits
tax. — of creditable input tax. — (a) Any
(a) Export sales — An exporter VAT-registered person, whose sales
who is a VAT-registered person within two are zero-rated or effectively zero-rated,
years from the date of exportation, apply may within two(2) years after the close
for the issuance of a tax credit certificate of the taxable quarter when the sales
or refund of the input tax attributable to were made, apply for the issuance of a
the goods exported, to the extent that tax credit certificate or refund of creditable
such input tax has not been applied to input tax due or paid attributable to such
output tax and upon presentation of sales, except transitional input tax
proof that the foreign exchange to the extent that such input tax has
proceeds has been accounted for not been applied against output tax.
in accordance with the regulations Provided, however, That in the case of
of the Central Bank of the zero-rated sales under Sec.
Philippines. 100(a)(2)(A)(i)(ii)and(b) and Sec.
102(b)(1) and (2), the acceptable
b) Zero-rated or effectivity foreign currency exchange proceeds
zero-rated sales. — Any person, thereof had been duly accounted for in
except those covered by par.(a) accordance with the regulations of the
above, whose sales are zero-rated Bangko Sentral ng Pilipinas (BSP):
or are effectivity zero-rated may, Provided, further, That where the taxpayer
within two years after the close of is engaged in zero-rated or effectively
the quarter when such sales were zero-rated sale and also in taxable or
made apply for the issuance of a exempt sale of goods or properties or
tax credit certificate or refund of services, and the amount of creditable
the input taxes-attributable to such input tax due or paid cannot be directly
sales to the extent that such input or entirely attributed to any one of the
tax has not been applied against transactions, it shall be allocated
output tax. proportionately on the basis of the
volume of sales.
c) Capital goods. — A
VAT-registered person may apply (b) Capital goods. — A VAT-
for the issuance of a tax credit registered person may apply for the
certificate or refund of input taxes issuance of a tax credit certificate or
paid on capital goods importer or refund of input taxes paid on
locally purchased, to the extent capital goods imported or locally
that such input taxes have not purchased, to the extent that such input
been applied against output taxes. taxes have not been applied
The application for refund may against output taxes. The application may
be made only after the expiration be made only within two (2) years
of two (2) succeeding quarters after the close of the taxable quarter
following the quarter in which when the importation or purchase was
the importation or local purchase made.
was made: Provided, that a
VAT-registered person who
is just commencing business
may apply for refund of input
taxes under this paragraph not
earlier than 130 days from the
date of registration or actual start
of business operations, whichever
comes later. Provided, however,
That the application is filed not
later than 2 years from the dates
herein prescribed.
d) Cancellation of VAT (c) Cancellation of VAT-registration

registration — A person whose — A person whose registration has been
registration has been cancelled cancelled due to retirement from or
due to retirement or cessation of cessation of business, or due to changes
business, or due to changes in or in or cessation of status under Sec. 100(c)
cessation of status under Sec. of this Code may, within two (2) years
100(c) of this Code may, within 2 from the date of cancellation, apply for
years from the date of cancellation, the issuance of a tax credit certificate
apply for the issuance of a tax credit for any unused tax which may be used
certificates for any unused input tax in payment of his other internal revenue
which he may use in payment of his taxes.
other internal revenue taxes.
e) Period within which refund of (d) Period within which refund or tax
input taxes may be made by the credit of input taxes shall be made. —
Commissioner — The Commissioner In proper cases, the Commissioner shall
shall refund input taxes within 60 grant a refund or issue the tax credit
days from the date the application for creditable input taxes within sixty
for refund was filed with him or his (60) days from the date of submission
duly authorized representative. No of complete documents in support of
refund of input taxes shall be the application filed in accordance with
allowed unless the VAT-registered sub-paragraphs (a) and (b) hereof. In
person files an application. case of full or partial denial of the claim
for.
(c) Cancellation of Registration. (e) Cancellation of Registration. —
— The registration of any person The registration of any person who ceases
who ceases to be liable to the VAT to be liable to the VAT shall be cancelled
shall be cancelled by the Commissioner by the Commissioner upon filing of an
upon filing of an application for application for cancellation of registration.
cancellation of registration. Any person Any person who opted to be registered
who opted to be registered under under par.(d) of this section may, under
par (d) of this section may, under regulation of the Sec. of Finance, apply for
regulations of the Sec. of Finance, cancellation of such registration.
apply for cancellation of such
registration.
Sec. 108. Invoicing and accounting Sec. 108. Invoicing and accounting
requirements for VAT-registered requirements for VAT-registered persons
persons. — (a) Invoicing requirements. — (a) Invoicing requirements. — A VAT
— A VAT-registered person shall, -registered person shall, for every sale,
for every sale, issue an invoice or issue an invoice or receipt. In addition to
receipt. In addition to the information the information required under Sec. 238,
required under Sec. 238, the ff. the ff. information shall be indicated
information shall be indicated in the in the invoice or receipt:
invoice or receipt: (1) A statement that the seller is a
VAT — registered person, followed by his
(1) The VAT registration No. TIN: and
(2) If the seller bills the tax as a (2) The total amount which the purchaser
separate item in the invoice. pays or is obligated to pay to the
(A) the amount of gross selling price seller which the indication that such
or gross receipts on which the amount includes the VAT.
value-added tax is based;
(B) the amount of VAT determined by
multiplying the amount of gross selling
price or gross receipts by the rate of
tax; and
(C) the sum of (i) the gross selling
price or gross receipts and (ii) the
VAT which the purchaser pays or is
obligated to pay to the vendor.
(3) If the seller elects not to bill
the tax as a separate item in the
invoice or receipt the total amount
charged against the buyer.
(b) Accounting requirement. — (b) Accounting requirements. —

Notwithstanding the provisions of Notwithstanding the provision of Sec.
Sec. 233, all persons subject the 223, all persons subject to the VAT
VAT under Sec. 100 and 102 shall under Secs. 100 and 102 shall, in addition
in addition to the regular accounting to the regular accounting records required,
records required, maintain a subsidiary maintain a subsidiary sales journal
sales journal and subsidiary purchase and subsidiary purchase journal on
journal on which the daily sales and which the daily sales and purchases are
purchases are recorded. The recorded. The subsidiary journals shall
subsidiary journals shall contain such contain such information as may
information as may be required by be required by the Sec. of Finance.
the Sec. of Finance.
Sec. 109. — Notification requirements — SAME (NOT AMENDED)

(a) change of place of business — It
shall be the duty of every VAT-registered
person to file a notice of change of his
principal place of business or any of his
branches or offices. Such notification
shall be file within 15 days from the
date of such change with the Rev.
District Officer who have jurisdiction
of his former and new place of
business.
(b) Other changes. — Any person SAME
registered in accordance with Sec.
107 shall notify the Rev. District
Officer of the change or termination
of his status as a VAT-registered
person.
Sec. 110. Return and payment of SAME
VAT. — (a) Where to file the return
and pay the tax. — Every person subject
to VAT shall file a quarterly return of his
gross sales or receipts and pay the tax
due thereon to a bank duly accredited
by the Commissioner located in the
rev. district where such person is
registered or required to be registered.
However, in cases where there are no
duly accredited agent banks within the
city or municipality, the return shall be
filed and any amount due shall be paid
to any duly accredited bank within the
district, or to the Rev. District Officer,
Collection Agent or duly authorized
Treasurer of the city or municipality
where such taxpayer has his principal
place of business. Only one consolidated
return shall be filed by the taxpayer for
all the branches and lines or business
subject to VAT. If no tax is payable
because the amount of input tax and any
amount authorized to be offset against
the output tax due on the return, the
taxpayer shall file the return with
the RDO, Collection Agent, or
authorized muni, treasurer where the
taxpayer's principal place of business
is located.
(b) Time for filing of return and SAME

payment of tax. — The return shall be
filed and the tax paid within 20 days
following the end of each quarter
specifically prescribed for a VAT-
registered person under regulations
to be promulgated by the Sec. of
Finance: Provided, however, That
any person whose registration is
cancelled in accordance with par (c)
of Sec. 107 shall file a return within
20 days from the cancellation of
such registration.
(c) Initial returns — The (c) Withholding of Creditable VAT —

Commissioner may prescribed initial The govt. or any of its political
taxable period for any VAT-registered subdivisions, instrumentalities or
person for his first return, which in no agencies, including GOCCs shall,
case shall exceed 5 months. before making payment on account
of its purchase of goods from sellers and
services rendered by contractors which are
subject to the VAT imposed in Secs. 100
and 102 of this Code, deduct and withhold
the VAT due at the rate of 3% of the gross
payment for the purchase of goods, and
6% on gross receipts for services rendered
by contractors on every sale or installment
payment which shall be creditable against
the VAT liability of the seller or contractor;
Provided, however, That the payment for
lease or use of properties or property rights
non-resident owners shall be subject to ten
percent (10%) withholding tax at the time
of payment. For this purpose, the payor or
person in control of the payment shall be
considered as the withholding agent.
Sec. 111. Power of the Commissioner SAME

to suspend the business operations
of taxpayer — The Commissioner or
his duly authorized representative is
hereby empowered to suspend the
business operations and temporary
close the bus. establishment of any
person for any of the ff. violations:
(a) In the case of a VAT-registered

person —
(1) failure to issue receipts or invoices
(2) Failure to file a VAT return as required
under Sec. 110.
(3) Understatement of taxable sales or
receipts by 30% or more of his correct
taxable sales or receipts for the taxable
quarter

RR 7-95 Consolidated VAT

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Copyright:

Verfügbare Formate

RR 7-95 Consolidated VAT

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Verfügbare Formate

December 9, 1995

REVENUE REGULATIONS NO. 07-95

SUBJECT : Consolidated Value-Added Tax Regulations

TO : All Internal Revenue Officers and Other Concerned

Pursuant to the provisions of Section 245 and 4 of the National

COVERAGE, NATURE, BASIS AND RATE OF VALUE-ADDED TAX (VAT)

However, in the case of importation of taxable goods, the importer, whether an

"Person" refers to any individual, trust, estate, partnership, corporation, joint

However, any business or businesses pursued by an individual where the

The rule of regularity to the contrary notwithstanding, services rendered in the

SECTION 4.99-2. Value-added tax: nature and characteristics. — VAT is an

SECTION 4.100-1. Value-added tax on sale of goods or properties.

3. The right or the privilege to use in the Philippines any industrial

5. Radio, television, satellite transmission and cable television time.

However, in the case of sale of real properties on the deferred-payment basis,

"Initial payments" means payment or payments which the seller receives

Also excluded from initial payments are notes or other evidences of

Pre-selling of real estate properties by real estate dealers shall be subject to

Transmission of property to a trustee shall not be subject to VAT if the

SECTION 4.100-2. Zero-rated sales. — A zero-rated sales by a

The following sales by VAT-registered persons shall be subject to 0%:

(a) Export sales

"Export Sales" shall mean:

(2) The sale of raw materials or packaging materials to a

(3) The sale of raw materials or packaging material to an

(4) Sale of gold to the Bangko Sentral ng Pilipinas (BSP);

(5) Those considered export sales under Articles 23 and

(b) Foreign currency denominated sale, those mentioned in Sections

"Foreign currency denominated sale" means the sale to a non-resident

Sales of locally manufactured or assembled goods for household and

(c) Sales to persons or entities whose exemption under special laws,

SECTION 4.100-3. Effectively zero-rated sale of goods and properties.

SECTION 4.100-4. "Transactions Deemed Sale" — (a) The

(A) Transfer, use or consumption not in the course of business of goods

(B) Distribution or transfer to:

1) Shareholders or investors are share in the profits of the

Property dividends which constitute stocks in trade or properties

(2) Creditors in payment of debt or obligation.

(C) Consignment of goods if actual sale is not made within 60 days

(D) Retirement from or cessation of business with respect to all goods

(i) Change of ownership of the business; and

(ii) Dissolution of a partnership other than a general

(b) The Commissioner shall, by regulations, determine the appropriate

SECTION 4.100-5. Changes in or cessation of status as a

(1) Change of business activity from value-added status to exempt

(2) Approval of a request for cancellation of registration due to

(3) Approval of a request for cancellation of registration due to a desire

(4) Approval of a request for cancellation of registration of one who

1) Change of control of a corporation by the acquisition of the

2) Change in the trade or corporate name of the business;

SECTION 4.100-6. Computation of output tax. — The output tax on the

(b) On transactions "deemed sale". — The output tax equivalent to 10%

Any unused input taxes as of the retirement, change or cessation of status as

SECTION 4.100-1. Value-Added tax on importation of goods. —

In case the valuation used by the Bureau of Customs in computing customs

Importation of petroleum products and the raw materials to be used by the

(c) Sale, transfer or exchange of imported goods by tax-exempt persons.

SECTION 4.102-1. Value-Added Tax on the sale of services and use or

"Sale or exchange or services" means the performance of all kind of services

1) construction and service contractors;

2) stock, real estate, commercial, customs and immigration brokers;

3) lessors of property, whether personal or real;

5) lessors or distributors of cinematographic films;