Antonio, Gladys C.

Bagon, Jaleen Anne A.

Lapura, Melgen
An indirect business tax imposed on every
(a) sale, barter or exchange of goods (b) sale
of services (c) lease of goods or
commodities in the normal course of trade or
business and (d) importation (whether or not
in the course of trade or business)
OUTPUT (12%) XX
LESS: INPUT (12%) XX
VAT PAYABLE XX
 KEY TERMS AS DEFINED BY VAT REFORM ACT
Means the VAT due on sale or lease of taxable goods or
1. OUTPUT properties or services by any person registered as a VAT
entity.

Means the VAT due from or paid by a VAT registered

2. INPUT entity in the course of trade or business on purchase,
importation, lease or use of goods or properties or
services from a VAT supplier.

3. “In the course of trade or business” Means the regular conduct or pursuit of a commercial or
an economic activity

Output – input on a monthly VAT declaration and the

4. VAT PAYABLE quarterly VAT returns

• If input tax is > than the output, the resulting amount is

5. Excess of input over output treated as Tax Credit or a deferred asset.
• If arises from a quarter return, it may be carried over
to the next month or next quarter return.
• If arises from a monthly return, it can only be carried
over to the next month’s return.
 REPUBLIC ACT 9337 TRAIN LAW
Every person who, in the course In the TRAIn law, however, it is
of trade or business, sells, barters, subject to VAT if the aggregate of
exchanges, leases goods or his actual expected gross sales
property, renders services is and/or receipts exceeds 3, 000,
subject to VAT, if the aggregate of 000 pesos.
his actual expected gross sales
and/or receipts exceeds 1, 919,
500 pesos.
 TRAIN LAW
* There shall be levied, assessed, and * There shall be levied, assessed, and
collected on every sale, barter or collected on every sale, barter or
exchange of goods or properties, a exchange of goods or properties, a
value-added tax equivalent to 10% of value-added tax equivalent to 12% of
the gross selling price or gross value the gross selling price or gross value
in money of the goods or properties in money of the goods or properties
sold, bartered or exchanged, such tax sold, bartered or exchanged, such tax
to be paid by the seller or transferor. to be paid by the seller or transferor.
 GENERAL RULE
All sales of goods and properties are subject to VAT
except those listed in the provisions zero-rated and
exempted transactions.
 ZERO-RATED VAT
TRANSACTIONS
■ Export Sales
■ Sales to persons or entities whose exemption
under special laws or international
agreements to which the Philippines is a
signatory effectively subjects such sales to
zero rate.
 Foreign Currency Denominated Sale (means sale
to a nonresident of goods, except those mentioned in Sections 149 and
150, 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) is removed from the zero-rated
transactions in the TRAIN law.
EXPORT SALES
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 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)
2. Sale and delivery of goods to:
– Registered enterprises within a separate customs territory as provided under special laws;
– Registered enterprises within tourism enterprise zones as declared by the Tourism Infrastructure
and Enterprise Zone Authority (TIEZA) subject to the provisions under Republic Act No. 9593 or
The Tourism Act of 2009
3. Sale of raw materials or packaging materials to a nonresident 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);
4. Sale of raw materials or packaging materials to export-oriented enterprise whose export
sales exceed seventy percent (70%) of total annual production;
5. Those considered export sales under Executive Order No. 226, otherwise known as the
Omnibus Investment Code of 1987, and other special laws
6. The sale of goods, supplies, equipment and fuel to persons engaged in international
shipping or international air transport operations*
* Provided that:
a. the goods, supplies, equipment and fuel shall be used for international shipping or air transport
operations
b. subparagraphs (3), (4), and (5) hereof shall be subject to the twelve percent (12%) value-added tax
and no longer be considered export sales subject to zero percent (0%) VAT rate upon satisfaction of
the following conditions:
i. The successful establishment and implementation of an enhanced VAT refund system that
grants refunds of creditable input tax within ninety (90) days from the filing of the VAT refund
application with the Bureau: Provided, That, to determine the effectivity of item no. 1, all
applications filed from January 1, 2018 shall be processed and must be decided within ninety
(90) days from the filing of the VAT refund application; and
ii. All pending VAT refund claims as of December 31, 2017 shall be fully paid in cash by
December 31, 2019
■ Refers to the local sale of service by a VAT-registered person to a person or entity who was granted indirect tax exemption
under the special laws or international agreement.
EXAMPLES:
 Sale to Asian Development Bank (ADB)
 Sale to International Rice Research Institute (IRRI)
 Sale to duly registered and accredited enterprises with Subic Bay Metropolitan Authority (SBMA)
 Sale to duly registered and accredited enterprises with Clark Development Authority (CDA)
 Sale to duly registered and accredited enterprises with Philippines Economic Zone Authority (PEZA)
 The following are subject to Output VAT:
■ Sale of residential lot with gross selling price exceeding 1, 500, 000 in value
■ Sale of house and lot, other residential dwellings with GSP exceeding 2, 500, 000 in value
– Provided: On January 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 by Republic Act No.
7279, sale of house and lot, and other residential dwellings with selling price of not more than
P2,000,000
– Provided, further, that every 3 years thereafter, the amount herein stated shall be adjusted to
its present value using the Consumer Price Index, as published by the Philippine Statistics
Authority (PSA)
■ Installment sale of residential house and lot or other dwellings with
GSP exceeding 1, 000, 000.
■ A real estate investment trust (REIT) shall be subject to VAT on its
gross sales from any disposal of real property.
 GROSS SELLING PRICE
■ Basis of VAT on taxable sale of real property is gross selling price which is either selling price
stated in the sale document or the FMV, whichever is higher.
a. Zonal value
b. Real property tax declaration
■ In the absence of zonal value, the real tax declaration value vs. the consideration, whichever is
higher.
■ In case of sale of real property on installment plan with the zonal or FMV higher than the
consideration of the sale, the formula will be:
■ Means sale of real property by a real estate dealer, the initial payments of which in the
year of sale do not exceed 25% of GSP.
 Initial Payment – the payment which the seller receives before or upon the
execution of the instrument of sale and payments which the seller is scheduled to
receive in cash or property during the taxable year when the sale was made.
 Initial payments does not include mortgage on the real property 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 initial payments.
■ The transfer of real properties by a
corporation to its shareholders in the form
of liquidating dividends is NOT subject to
VAT.
ADVANCE VAT
■ On Transport of Naturally Grown and Planted Timber Products
– based on applying VAT at 12% on corresponding value per
cubic meter (page 215)
■ Sale of Refined Sugar – refined sugar refers to sugar whose
content of sucrose by weight, in the dry state, corresponds to a
polarimeter. (page 216)
■ Sale of Jewelry, Gold and other metallic metals to NRA-NETB or
NRFC (page 218)
However, it is paid in 3 installments of 2 monthly and
1 quarterly payments. VAT is paid monthly and
quarterly.