Beruflich Dokumente
Kultur Dokumente
COLLEGE OF ACCOUNTANCY
San Isidro, Nueva Ecija
Telefax (044) 940-6181
MODULE 2
VALUE ADDED TAX (VAT) EXEMPT SALES
(Section 109 NIRC, as amended under RA 10963- TRAIN Law; RR 13-2018)
EXERCISE # 3: Gotchie returned from South Africa after watching a game between the Black and White
Basketball Team. He brought with him several personal effects (souvenirs) he brought from South Africa. Are
the personal effects brought by Gotchie subject to VAT?
TRANSACTION PARTICULARS
1. Gross receipts of transportation contractors engaged in the transport of passengers
by land.
2. Gross receipts of transportation contractors engaged in the transport of goods and/or
cargoes by land.
3. Gross receipts of domestic carriers engaged in the transport of passengers by air or
sea.
4. Gross receipts of domestic carriers engaged in the transport of goods and/or cargoes
by air or sea.
5. Gross receipts of international air carriers doing business in the Philippines.
6. Gross receipts from international flights of domestic carriers.
7. Gross receipts of banks and non-bank entities doing business in the Philippines
8. Gross receipts of radio and/or television broadcasting companies with annual gross
receipts from the preceding year exceeding P 10,000,000.
9. Gross receipts of radio and/or television broadcasting companies with annual gross
receipts from the preceding year does not exceed P 10,000,000. (Assume Non-VAT
registered)
10. Gross receipts of operators of cabarets, night and day clubs.
F. Services by
A. “Agricultural contract growers” and
B. Milling for others of:
o Palay into rice
o Corn into corn grits
o Sugar cane into raw sugar
G. Medical, dental, hospital and veterinary services except those rendered by professionals.
EXERCISE # 4: Aling Dionisa was delighted after watching game 5 of MPBL finals between Batangas
and Muntinlupa, a basketball league founded and organized by his son, Manny Pacquiao. However,
due to high temperature brought about by the weather and fatigue, she suddenly felt wobbly and
symptoms for high blood were apparent. Taking the advice of her affectionate partner, she consulted
a doctor upon arrival in Manila. For a better assessment of Aling Dionisa’s condition, she was advised
to undergo some laboratory tests/procedures in a prominent hospital in Taguig. The following were
incurred by Aling Dionisa.
-Doctor’s consultation fee P 200,000
-Various laboratory fees in a hospital 500,000
-Medicines purchased from the hospital’s pharmacy 1,000,000
Required: Dertermine the total amount of VAT paid by Aling Dionisa.
EXERCISE # 5: After a heated confrontation with Juan, Pedro suffered physical injuries requiring one
(1) month hospitalization. The following were incurred by Pedro:
Transaction Particulars
1 Gross receipts by General de Jesus College, a proprietary educational institution
registered under CHED.
2 Gross receipts by Wesleyan University-Philippines, a non-stock, non-profit
educational institution registered under CHED.
3 Gross receipts by St. Isidore Christian Academy accredited by the Department of
Education (DepEd).
4 Gross receipts by Inkmark Institute, a vocational school registered under TESDA.
5 Gross receipts by a review center offering CPA review course.
6 Gross receipts by a tutorial school offering review courses for college entrance
examination.
It is to be reiterate however, that sale or importation of agricultural food products in their original
state is exempt from VAT irrespective of the seller and buyer thereof, pursuant to subsection (a) [Sec.
4. 109-1 (B) (I), RR 4-2007]
Exercise # 7: Gapan Agri Coop is a duly registered cooperative engaged in growing palay and
production of bags out of palay dried leaves and stems. It is also engaged in the sale of other house
decors made of water lilies from other cooperatives and traders. The following data for the year were
provided:
To Members To Non-Members
Sale of Palay bags P 6,000,000 P 4,000,000
Sale of Home decors 2,000,000 3,000,000
M. Gross receipts from “lending activities” by credit or multi-purpose cooperatives duly registered with
the Cooperative Development Authority”. Exemption is not only limited to the gross receipts on loans
extended to its members but also to other persons who are not members.
N. “Sales by non-agricultural, non-electric and non-credit cooperatives duly registered with the
Cooperative Development Authority (CDA), provided that the share capital contribution of each
member does not exceed fifteen thousand pesos (P 15,000) and regardless of the aggregate capital
and net surplus ratably distributed among the members”. Importation by non-agricultural, non-
electric and non-credit cooperatives of machineries and equipment including spare parts thereof, to
be used by them are subject to VAT.
Exercise # 8:
Case 1: Naccor Yhente, an electric cooperative provided the following data for the taxable year (net
of applicable taxes):
Sales P 3,000,000
Purchases 1,000,000
Question: What is the correct amount of VAT payable, if any?
Case 2: Kooper Tiba is a duly registered cooperative founded and operated by employees of Sun Rice
Group of Companies with maximum contribution of P 15,000 each. The cooperative is duly registered
with the Cooperative Development Authority. It operates an eatery that caters mainly the Sun Rice’s
employees.
The following data were provided for the taxable year (net of applicable taxes):
Sales P 3,000,000
Purchases 1,000,000
Question 1: What is the correct amount of VAT payable, if any?
Question 2: Assume further that the Kooper Tiba imported equipment valued at P 1,000,000 for its
own use. What amount, if any should be recognized as liability for VAT?
450,000 or as may from the time to be determined by HUDCC and the NEDA and other related
laws.
4. Residential lot valued at P 1,500,000 and below beginning January 1, 2018 (previously P
1,919,500) or house and lot and other residential dwellings valued at P 2,500,000 and below
beginning January 1, 2018 (previously P 3,199,200)
If two or more adjacent residential lots are sold or disposed in favor of one buyer , for the purpose of
utilizing the lots as one residential lot, the sale shall be exempt from VAT only if the aggregate value do not
exceed P 1,5000,000 (as amended). Adjacent residential lots, although covered by separate titles and/or
separate tax declarations, when sold to one and the same buyer whether covered by one separate Deed of
Conveyance, shall be presumed as sale of one residential lot.
Provided, that beginning January 1, 2021, the VAT exemption shall only apply to sale of real
properties not primarily held for sale to customers or held for lease in the ordinary course of trade or
business, sale of real property utilized for socialized housing as defined under RA No. 7279, sale of house and
lot and other residential dwellings with selling price of not more than two million pesos (P 2,000,000):
Provided, further, that every three (3) years after, the amounts state therein shall be adjusted to its present
value using the Consumer Price Index, as published by the Philippine Statistics Authority (PSA).
Sale of
Residential lot
Selling price < P 1,500,000* per lot (as amended) VAT Exempt
Selling price > P 1,500,000* per lot (as amended) VAT
Exercise # 10: Which of the following sale in 2019 made by a real estate company is subject to VAT?
1. Sale of parcel of land held as capital asset.
2. Sale of parcel of land not ordinary held for sale to customers but is used in business operations.
3. Sale of parcel of “commercial” land ordinary held for sale in the course of trade or business. Selling
price is not more than P 1,500,000.
4. Sale of a parcel of “residential” land in ordinary course of trade or business. Selling price is not more
than P 1,500,000.
5. Sale of a parcel of “residential” land in ordinary course of trade or business. Selling price is P
3,000,000.
6. Sale of three (3) adjacent “residential” lots in 2019 to single buyer ordinary held for sale in the
ordinary course of trade or business. Selling price is P 750,000 per lot.
7. Sale of residential condominium unit valued at P 2,500,000.
8. Sale of parking lot in a condominium unit for P 800,000.
Q. Lease of Residential Unit
Lease of a residential unit with a monthly rental per unit not exceeding fifteen thousand pesos (P15,000)
(as amended under TRAIN Law: previously P 12,800) regardless of the amount of aggregated rentals received
by the lessor during the year (RR 16-2011; RR 13-2018).
Lease of residential units where the monthly rental per unit exceeds P 15,000 but the aggregate such
rentals of the lessor during the year do not exceed P 3,000,000 (as amended under TRAIN Law: previously P
1,919,500) shall likewise be exempt from VAT, however, the same shall be subjected to three percent (3%)
percentage tax under Section 116 of the Tax Code (RR-16-2011: RR 13-2018).
3% OPT VAT
The revised threshold of P 15,000 and P 3,000,000 shall apply only upon effectivity of RA 10963 (TRAIN Law)
beginning January 1, 2018.
In cases where a lessor has several residential units for lease, some are leased out for a monthly rental
per unit of not exceeding P 15,000 (as amended) while others are leased out for more than P 15,000 per unit,
his taxability will be:
a. The gross receipts from rentals not exceeding P 15,000 per month per unit shall be exempt from VAT
regardless of the aggregate annual gross receipts.
b. The gross receipts from rentals exceeding P 15,000 per month per unit shall be subject to VAT if the
annual gross receipts exceed P 3,000,000 as amended, from said units only – not including the gross
receipts from units leased out for not more than P 15,000. Otherwise, the gross receipts shall be
subject to three percent (3%) percentage tax under Section 116 of the tax Code ( RR 16-2011; RR 13-
2018).
Exercise # 11: Which of the following 2019 transactions by a property developer is subject to VAT?
Case 1: Lease of commercial units in Makati for P 15,000 per unit per month. Gross receipts during the year
was P 1,200,000. The developer is a VAT registered entity.
Case 2: Lease of residential units in Gapan City in 2019 taxable year for P 15,000 per unit per month. The
aggregate gross receipt of the lessor during the year was P 5,000,000.
Case 3: Lease of residential unit in Cabanatuan City for P 20,000 per unit per month. The aggregate gross
receipt of the lessor was P 5,000,000.
Case 4: Lease of several residential units in San Jose City with the following details
Monthly Rent Annual Gross Receipts
P 12,000 P 3,200,000
P 16,000 P 2,800,000
Case 5: Lease of residential units in San Jose City with the following details
Monthly Rent Annual Gross Receipts
P 12,000 P 3,200,000
P 16,000 P 3,800,000
R. Sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin
which appears at regular intervals with fixed prices for subscription and sale and which is not
devoted principally to the publication of paid advertisements.
Under the BIR Rulings No. 083-2014, the term “book”, newspaper, magazine, review, bulletin” only covers printed
matters in hard copy and does not apply to electronic format or versions including but not limited to:
- E-books
- E-journals
- Electronic copies
- Online library sources
- CDs and software.
Furthermore, the activities that exempt from VAT under this provision are as follows:
1. Sale
2. Importation
3. Printing
4. Publication of books, newspapers, magazines, reviews and bulletins. Moreover, newspapers, magazines,
reviews and bulletins should appear at regular intervals with fixed prices for subscription and sale and which
is not devoted principally for the publication of paid advertisements.
Thus, a corporation’s other transactions (such as the printing of brochures, bookbinding, engraving, stereotyping,
electrotyping, lithographing of various reference books, trade books, journals and other literary works) are subject
to VAT. The taxpayer is required to register its business as a VAT business entity and issue a separate VAT
invoice/receipt to record such transactions.
S. Transport of passengers by international carriers doing business in the Philippines.
T. Sale, importation or lease of passengers or cargo vessels and aircraft, including engine, equipment
and spare parts thereof for domestic or international transport operations, provided, that the
exemption from vessels shall be subject to the requirements on restriction on vessel importation and
mandatory vessel retirement program of MARINA (RR 15-2015; RR 13-2018)
U. Importation of fuel, goods and supplies by persons engaged in international shipping or air transport
operations. Provided that the fuel, goods and supplies shall be used for international shipping or air
transport operations. Thus, said fuel, goods and supplies shall be used exclusively or shall pertain to
the transport of goods and/or passenger from a port in the Philippines directly to a foreign port, or
vice versa, without docking or stopping at any other port in the Philippines is for the purpose of
unloading passengers and/or cargoes that originated from abroad, or to load passengers and/or
cargoes bound for abroad; Provided, further, that if any portion of such fuel, goods or supplies is used
for purposes other than that mentioned in this paragraph, such portion of fuel, goods or supplies
shall be subject to 12% VAT.
V. Services of banks, non-banks financial intermediaries performing quasi-banking functions and other
non-bank financial intermediaries such as money changers and pawnshops, subject to percentage tax
under Section 121 and 122, respectively of the Tax Code.
W. Sale or lease of goods and services to senior citizens and persons with disabilities, a provided under
RA No. 9994 (Expanded Senior Citizens Act of 2010) and RA No. 10754 (An Act Expanding the
Benefits and Privileges of Persons with Disability (PWD), respectively.
X. Transfer of property pursuant to Section 40 (C)(2) of the Tax Code, as amended.
Y. Association due, membership fees and other assessments and charges collected on purely
reimbursement basis by homeowners associations and condominium corporations established under
RA No. 9904 (Magna Carta for Homeowners’ and Homeowners Association) and RA No. 4726
(Condominium Act), respectively. This provision shall take effect only beginning January 1, 2018 or
upon the effectivity of RA No. 10963- TRAIN Law.
Z. Sale of Gold to Bangko Sentral ng Pilipinas (BSP)
AA. Sale of drugs and medicines prescribed for diabetes, high cholesterol and hypertension. (Beginning
January 1, 2019)
BB. 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 gross receipts do not exceed
the amount of P 3,000,000.
Exercise # 12
Boogart, CPA Practitioner, signified his 1st Quarter Income Tax Return his intention to be taxed at 8% income
tax in lieu of the graduated income tax rates and 3% Percentage Tax under Section 116 of the Tax Code.
However, his gross sales and/or gross receipts during 2019 taxable year have exceeded the VAT threshold as
follows:
January P 250,000
February 250,000
March 250,000
April 250,000
May 250,000
June 250,000
July 250,000
August 250,000
September 500,000
October 500,000
November 1,000,000
December 1,250,000
Total P 5,250,000
Question: Can Pedro avail the 8% tax during the year?
References:
Tabag, E., Garcia, E.J. (2019). Transfer and Business Taxation, PRTC, Sampaloc Manila.
Republic Act No. 8424. National Internal Revenue Code (NIRC)
Republic Act No. 10963 TRAIN Law