Exempt Importation

• Basic necessities (not subject to VAT)

o Agricultural and marine food products in original state, used for HUMAN
CONSUMPTION
§ Fruits and vegetables
§ Livestock
§ Marine foods
§ Milk, eggs, meat for human consumption
§ Includes those that undergone simple processing
• Boiling
• Broiling
• Husking
• Roasting
• Stripping
• Grinding
• Freezing
• Drying
• Smoking
• Salting
§ Includes those that are packaged using technology
• Shrink wrapping in plastics
• Vacuum packing
• Tetra-packing
• Other similar methods
o Fertilizers, seeds, seedlings and fingerlings, fish, prawn, livestock and poultry
feeds (including ingredients used in the manufacture of finished feeds)
o Books and any newspaper, magazine, review, or bulletin, which 1) appear at
regular intervals with fixed prices for subscription and sale and 2) not devoted
principally to the publication of paid advertisements
o Passengers or cargo vessels and aircraft (including engine, equipment and spare
parts for domestic/international transport ops), but requirements by MARINA on
restriction on vessel importation and mandatory vessel retirement program be
met:
§ Passenger/cargo vessels – 15 yrs.
§ Tankers – 10 yrs.
§ High-speed passenger crafts – 5 yrs.
• Importation by VAT-exempt persons
o International shipping or air transport operators on their import of fuels, goods
and supplies
§ Purpose: international consumption
o Cooperatives of direct farm inputs, machineries and equipment (including spare
parts to be used directly and exclusively in production and processing of
produce) – a.k.a. Agricultural Cooperatives
 o PEZA locators on import of goods/services
• Quasi-importation
o Personal and household effects belonging to residents of PH returning from
abroad and non-resident citizens coming to resettle in PH
o Professional instruments and implements, wearing apparel, domestic animals,
and personal household effects belonging to persons coming to settle in the
Philippines, for their own use and not for sale, barter, or exchange
• Importation exempt under special laws and international agreement
• Import of services
o Services from non-resident, service rendered abroad
o Services from NR, individual purchaser not engaged in business
o Services from NR by VAT-exempt persons (e.g. ecozone locators)

Exempt sales of goods, properties, services

• Sales to senior citizens and PWD
o Drugs, vaccines, foods for special medical purpose, casket or urn (exempt for SC
and PWD)
o Vitamins and mineral supplements, accessories and equipment (only for SC)
• Sales of exempt goods
o Agricultural and marine food products in original state
o Fertilizers, seeds, etc. (see above)
o Farm/fishery inputs
o Livestock/poultry feeds/ingredients in manufacture of feeds
o Books, newspapers, magazines
o Medicines for diabetes, high cholesterol, hypertension
o Passenger or cargo vessels and aircraft (spare parts, equipment, engines
included)
• Sales of goods by cooperatives (except electric coop)
o If transact business only with members
o If accum. Reserves >P10M, sales to non-members subject to business tax (only if
coop transacts with non-members)
o Transactions from unrelated activities are taxable
• Sales of residential properties
o Non-dealer
§ Real property classified as capital asset of VAT taxpayer
§ Real property of non-VAT taxpayer
§ Real property of person not engaged in business
o Dealer
§ Sale of real property utilized for socialized housing unit (non-taxable if
reached price ceiling):
• House and lot package – P450,000
 • Residential lots ONLY – P180,000
§ Sale of real property for low-cost housing – P750,000 price ceiling per
unit
§ Sale of residential lot @ P1,919,500/unit and below
§ Sale of residential dwelling valued at P3,199,200/unit and below
• Export sales by non-VAT persons
• Treaty-exempt sales of goods
• Tax-free exchange of property
• Sale of gold to BSP
• Exempt sale of services
o Educational services of schools, like:
§ Private educational institution duly accredited by:
• DepEd
• CHED
• TESDA
§ Government educational institutions
o Employment
§ Services performed in pursuant to employer-employee relationship
o Agricultural contract growers and millers
• Services by agricultural contract growers and milling for others
o Residential leasing (lease not exceeding P15,000/month)
§ Should be residential units (apartments and houses and lots for
residential purposes) – dormitories, bed spacers, boarding house.
o Sale of services by cooperatives
o Health/hospital services (except rendered by professionals and sales of drugs by
hospital drugstores)
o Home owner’s association or condominium corporation
o Lease of passenger/cargo vessels and aircraft (spare parts and equipment
included)
o Treaty-exempt sales of services
o Regional or area headquarter of a multinational company
o Transport of passengers by international carriers (Philippines to Abroad
operations)
o Services of printers and publishers
o Sales of service to senior citizens and PWD
§ Lodging establishment
§ Hospital and clinic
§ Sports and recreation center
§ Restaurants
§ Land, air, sea travel
§ Medical, dental, diagnostic, lab fees and professional medical fees
§ Funeral or burial service for senior citizens
o Sales of goods or services covered by special laws
 § Sales by ecozone locators
§ Receipts of proprietors of theaters or cinemas

PERCENTAGE TAX

Coverage:
1. Banks and non-bank financial intermediaries
a. Quasi-banking functions
i. Interest income, commissions, discounts from lending activities, income
from financial leasing on basis of remaining maturities of instrument from
which the receipts were derived:
1. Maturity period <=5 yrs. – 5%
2. Maturity period >5 yrs. – 1 %
ii. Dividend and equity shares in net income of subsidiaries – 0%
iii. On royalties, rentals of property (real/personal), profits from exchange,
other items treated as gross income – 7%
iv. On net trading gains within taxable year on foreign currency, debt
securities, derivatives, other similar financial instruments – 7%
b. Non-quasi-banking functions (e.g. Pawnshops, money changers)
i. Interest income, commissions, discounts from lending activities, income
from financial leasing on basis of remaining maturities of instrument from
which the receipts were derived:
1. Maturity period <=5 yrs. – 5%
2. Maturity period >5 yrs. – 1 %
ii. Other items treated as gross income – 5%
2. International carriers on their transport of cargoes, excess baggage and mails only
a. Passengers – exempt
b. Goods, mails, cargoes – 3% OPT on outgoing operations
3. Common carriers on land transport of passengers and keepers of garage (e.g. Jeepney,
PUB, Taxi, rental cars)
a. By land – 3% PT on passengers; 12% VAT on Baggage/Mails/Cargo
b. By water/sea – VATable on passengers ang baggage/mail/cargo
c. By air – same as b.
4. Amusement places
a. Boxing exhibitions – 10%; exempt receipts are:
i. World/Oriental Championship
ii. At least 1 contender is Filipino citizen
iii. Promoter is Filipino citizen or corp. (should be owned by Fil. Citizens by
60%)
b. Professional basketball games – 15%
c. Cockpits, cabarets, night/day clubs – 18%
d. Jai-alai and race tracks – 30%
 5. Brokers in effecting sales of stocks via PSE and corporations or shareholders on IPO
a. Sale barter, exchange (block sale included) of listed stocks via PSE is subject to
tax of 60% of 1% based on gross selling price/gross value in money of shares of
stocks sold
b. Tax on shares of stock sold or exchanged via IPO. Proportion of shares sold,
bartered, exchanged:
i. Up to 25% - 4% tax rate
ii. Over 25% but not over 33 1/3% - 2% tax rate
iii. Over 33 1/3% - 1% tax rate
6. Franchise grantees
a. Radio/television broadcasting companies (annual gross receipts not over P10M)
– 3%
b. Gas and water utilities – 2%
7. Life insurance companies and agents of foreign insurance – 2% on premiums collected,
except:
a. Premiums refunded within 6 months after payment on account of rejection of
risk or returned for other reasons
b. Re-insurance premiums
c. Premiums from life insurance of non-residents received from abroad by
branches of domestic corporation, firm, or association doing business outside PH
d. Excess of premiums on variable contracts in excess of the amounts necessary to
insure the lives of the variable contract owners
8. Telephone companies on overseas communication
a. Origin PH, Destination PH – 12% VAT
b. Origin Abroad, Destination PH – 0% VAT if subject to zero-rating requirements; if
not, exempt
c. Origin PH, Destination Abroad – 10% tax
9. Jai-alai and cockpit operators on winnings
a. In general – 10%
b. Winnings from double, forecast/quinella and trifecta bets – 4%
c. Owners of winning race horses – 10%

VALUE-ADDED TAX
• Covers all vatable sales of goods, properties, services, lease of properties by VAT
Taxpayers
o VAT-Registered persons
o VAT-Registerable persons

VAT Threshold Amount Covered taxpayers

 General P3,000,000 All taxpayers (except
franchise grantees of radio or
television)
Special P10,000,000 Franchise grantees of radio
or television

VAT Model:

Output VAT Pxx

Input VAT (xx)
VAT Due Xx
Tax Credits (xx)
VAT Still Due Xx

Output VAT – VAT on VATable sales or receipts

Input VAT – VAT paid by taxpayer on domestic purchases from VAT suppliers or on
importation of goods/services in course of business

Sales subject to special VAT Rules

• Sales to gov’t. – limited claimable input VAT
o Sales to gov’t. and GOCC – 12% VAT
§ Required: 5% final withholding VAT
• Zero-rated sales – no output VAT, with claimable input VAT
• Exempt sales – no output and input VAT

Classification of sales/receipts for VAT purposes

1. Sales to gov’t
2. Zero-rated sales
3. Exempt sales
4. Regular sales – 12% VAT
a. All sales of goods, properties or services other than
i. Sales to gov’t or GOCC
ii. Zero-rated sales
iii. Exempt sales

Rules on classification
• Sale of goods to non-resident buyer: zero-rated sale
• Sale of vatable goods/services in PH: VATable sale
• Sale made to gov’t or GOCC: Final withholding VAT
• Sale considered an export or zero-rated (e.g. sales to VAT exempt person) – 0% VAT
• Sale of exempt goods and services to gov’t or GOCC – exempt sale
REGULAR OUTPUT VAT
TAXABLE TRANSACTION
Sale of goods
Sale of services
Sale of properties
Transactions deemed sales
TAX BASIS
Gross selling prices (unless unreasonably
lower)
Gross receipts
Gross selling price (defined by BIR), which is
higher of
• Consideration or selling price or
• Fair value of property (higher of):
o Zonal value
o Fair value (per assessor’s
office)
FV of property deemed sold