CH4 – DQ

1. What is a VAT-exempt sale?

A: This refers to exempt sales which are exempt consumption of
goods, properties or services from domestic sellers. Exempt sales are also
not subject to percentage tax.

2. Enumerate the list of VAT-exempt sales.

A: 1. Sale of agricultural or marine food products in original state
2. Sale of certain farm or fishery inputs
3. Livestock/poultry feeds or ingredients in the manufacture of feeds
4. Services by agricultural contract growers and milling for others of
palay into rice, corn into grits, and sugar cane into raw sugar
5. Health or hospital services
6. Employment
7. Transport of passengers by international carriers (RA 10378)
8. Regional or area headquarter of a multinational company
9. Sale or lease of aircraft or sea vessels, including engine, equipment
and spare parts thereof for domestic or international operation
10. Education
11. sale or lease of real properties under certain conditions
12. Sale of cooperatives
13. Export sales of non-VAT taxpayers
14. Transactions exempt under international agreements or special
laws
15. Invoicing requirements for exempt sales
16. Lease of residential unit with monthly rental not exceeding P12,800
17. Sales by non-agricultural, non-electric and non-credit cooperative
duly registered and in good standing with the Cooperative Dev’t Authority

3. Discuss the exemption criteria for the ff:

a. Agricultural or marine products – must be in their original state; have
undergone the simple process of preparation or preservation for the
market including advanced technological means of packaging.

b. Health Services – exemption applies to all health services rendered by

a private, non profit or government hospital. Those rendered by
professionals and the sale of drugs are vatable.

c. Schools – this exemption covers gov’t and private schools, proprietary

or non-profit, so long as they are duly accredited by the DepEd,
Commission on Higher Educ., TESDA, and those rendered by gov’t
educational institution.

d. Transport services of international carriers – these carriers are air

carriers or shipping carriers owned by resident foreign corporations
doing business in the Phils.which are exempt from business tax under
RA 10378
 e. Real properties – sale was done by a person not engaged in realty
business (non-dealer); and a dealer provided that:
a. the sale of residential lot is valued at P1,919,500 and below;
b. the sale of residential dwelling is valued at P3,199,200 and
below;
c. the sale is utilized for socialized housing; and
d. the sale is utilized for low-cost housing

4. Discuss the concept of “in original state”.

A: The phrase “in original state” means unprocessed. Agricultural or
marine food products are still considered in original state even if they
have undergone the simple process of preparation, preservation or
packaging for the market including advanced technological means of
packaging.

5. Who is an agricultural contract grower?

A: This refers to persons producing for others poultry, livestock or
other agricultural and marine food products in their original state.

6. Enumerate those entities with indirect tax exemption.

1. PEZA registered enterprises
2. Asian Development Bank
3. International Rice Research Institute
4. Phil. National Red Cross
5. Embassies of foreign gov’t
6. PAGCor

7. What is the tax treatment of sales to entities with indirect tax exemption?
A: Because of their nature and the legal fiction surrounding their
creation, this VAT exemption is effected by means of a zero-rating
treatment.

8. What is the invoicing requirement on exempt sales?

A: The caption “EXEMPT” on the invoice or receipt must be indicated
or pre-printed.