I.

General VAT Queries

Value-Added Tax Description

Value-Added Tax (VAT) is a form of sales tax. It is a tax on consumption levied on the sale, barter, exchange or lease
of goods or properties and services in the Philippines and on importation of goods into the Philippines. It is an indirect tax,
which may be shifted or passed on to the buyer, transferee or lessee of goods, properties or services.

Who are liable to register as VAT taxpayers?

Any person who, in the course of trade or business, sells, barters or exchanges goods or properties or engages in the sale or exchange
of services shall be liable to register if:

a. His gross sales or receipts for the past twelve (12) months, other than those that are exempt under Section 109 (A) to (U),
have exceeded Three Million Pesos (P3,000,000.00): or
b. There are reasonable grounds to believe that his gross sales or receipts for the next twelve (12) months, other than those that
are exempt under Section 109 (A) to (U), will exceed Three Million Pesos (P3,000,000.00).

When is a new VAT taxpayer required to apply for registration and pay the registration fee?

New VAT taxpayers shall apply for registration as VAT Taxpayers and pay the corresponding registration fee of five
hundred pesos (P500.00) using BIR Form No. 0605 for every separate or distinct establishment or place of business
before the start of their business following existing issuances on registration.

Thereafter, taxpayers are required to pay the annual registration fee of five hundred pesos (P500.00) not later than
January 31, every year.

What compliance activities should a VAT taxpayer, after registration as such, do promptly or periodically?

The following compliance activities must be performed by a VAT-registered taxpayer:

a. Pay the annual registration fee of P500.00 for every place of business or establishment that generates sales;
b. Register the books of accounts of the business/occupation/calling, including practice of profession, before using
the same;
c. Register the sales invoices and official receipts as VAT-invoices or VAT official receipts for use on transactions
subject to VAT. (If there are other transactions not subject to VAT, a separate set of non-VAT invoices or non-
VAT official receipts need to be registered for use on transactions not subject to VAT);
d. Filing of the Monthly Value-added Tax Declaration on or before the 20th day following the end of the taxable
month (for manual filers)/on or before the prescribed due dates enunciated in RR No. 16-2005 (for e-filers) using
BIR Form No. 2550M and of the Quarterly VAT Return on or before the 25th day following the end of the taxable
quarter using BIR Form No. 2550Q, reflecting therein gross receipts (for seller of service)/ gross sales (for seller
of goods) and output tax (VAT on sales); purchases of goods and services made in the course of trade or
business/exercise of profession and input tax (VAT on purchases), other allowable tax credits as in the case of
advance VAT payment and VAT withheld by government payors, and VAT payable or excess input VAT,
whichever is applicable, with the accredited agent banks (AABs) of the BIR or Revenue Collection Officers
(RCOs) of the BIR (in areas without AAB), for returns with payment, or with the RDO/LTDO having jurisdiction
over the taxpayer (home RDO/LTDO), for returns without payment. (The monthly VAT Declaration and the
Quarterly VAT Return shall reflect the consolidated total for all the taxable lines of activity and all the
establishments - head office and branches);
e. Submit with the RDO/LTDO having jurisdiction over the taxpayer, on or before the deadline set in the filing of the
Quarterly VAT Return, the soft copy of the Quarterly Schedule of Monthly Sales and Output Tax (if the quarterly
sales exceed P2,500,000.00), and the soft copy of the Quarterly Schedule of Monthly Domestic Purchases and
Input Tax/ the soft copy of the Schedule of Transactional/Individual Importation ( if the quarterly total purchases
exceed P1,000,000.00), reflecting therein the required data prescribed under existing revenue issuances.

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What is the liability of a taxpayer becoming liable to VAT and did not register as such?

Any person who becomes liable to VAT and fails to register as such shall be liable to pay the output tax as if he is a VAT-
registered person, but without the benefit of input tax credits for the period in which he was not properly registered.

Who may opt to register as VAT and what will be his liability?

a. Any person who is VAT-exempt under Sec. 109 of the Tax Code, as amended, may, in relation to Sec. 109 (2) of
the same Code, elect to be VAT-registered by registering with the RDO that has jurisdiction over the head office
of that person, and pay the annual registration fee of P500.00 for every separate and distinct establishment.
b. Any person who is VAT-registered but enters into transactions which are exempt from VAT (mixed transactions)
may opt that the VAT apply to his transactions which would have been exempt under Section 109 of the Tax
Code, as amended.
c. Franchise grantees of radio and/or television broadcasting whose annual gross receipts of the preceding year do
not exceed ten million pesos (P10,000,000.00) derived from the business covered by the law granting the
franchise may opt for VAT registration. This option, once exercised, shall be irrevocable. (Sec. 119, Tax Code).
d. Any person who elects to register under optional registration shall not be allowed to cancel his registration for the
next three (3) years.

The above-stated taxpayers may apply for VAT registration not later than ten (10) days before the beginning of the
calendar quarter and shall pay the registration fee unless they have already paid at the beginning of the year. In any case,
the Commissioner of Internal Revenue may, for administrative reason deny any application for registration. Once
registered as a VAT person, the taxpayer shall be liable to output tax and be entitled to input tax credit beginning on the
first day of the month following registration.

What are the instances when a VAT-registered person may cancel his VAT registration?

a. If he makes a written application and can demonstrate to the commissioner's satisfaction that his gross sales or
receipts for the following twelve (12) months, other than those that are exempt under Section 109 (A) to (U), will
not exceed Three Million Pesos (P3,000,000.00); or
b. If he has ceased to carry on his trade or business, and does not expect to recommence any trade or business
within the next twelve (12) months.

When will the cancellation for registration be effective?

The cancellation for registration will be effective from the first day of the following month the cancellation was approved.

What is the invoicing/receipt requirement of a VAT-registered person?

A VAT registered person shall issue :

a. A VAT invoice for every sale, barter or exchange of goods or properties; and
b. A VAT official receipt for every lease of goods or properties and for every sale, barter or exchange of services.

May a VAT-registered person issue a single invoice/ receipt involving VAT and Non-VAT transactions?

Yes. He may issue a single invoice/ receipt involving VAT and non-VAT transactions provided that the invoice or receipt shall clearly
indicate the break-down of the sales price between its taxable, exempt and zero-rated components and the calculation of the Value-
Added Tax on each portion of the sale shall be shown on the invoice or receipt.

May a VAT- registered person issue separate invoices/ receipts involving VAT and Non-VAT transactions?

Yes. A VAT registered person may issue separate invoices/ receipts for the taxable, exempt, and zero-rated component of its sales
provided that if the sales is exempt from value-added tax, the term "VAT-EXEMPT SALE" shall be written or printed prominently on

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the invoice or receipt and if the sale is subject to zero percent (0%) VAT, the term "ZERO-RATED SALE" shall be written or printed
prominently on the invoice or receipt.

How is the Value-Added Tax presented in the receipt/ invoice?

The amount of the tax shall be shown as a separate item in the invoice or receipt.

Sample:

Sales Price P 100,000.00

VAT 12,000.00
Invoice Amount 112,000.00

What is the information that must be contained in the VAT invoice or VAT official receipt?

1. Name of Seller
2. Description of the goods or properties or nature of the service
3. Unit cost
4. Quantity
5. Date of transaction
6. TIN of buyer, if VAT- registered and amount exceeds P1,000.00
7. Address of Buyer
8. Business Style of Buyer
9. Name of Buyer
10. Statement that the seller is a VAT-registered person, followed by his TIN
11. Business Address of the Seller
12. Business Style of the Seller
13. Purchase price plus the VAT, provided that
o The amount of tax shall be shown as a separate item in the invoice or receipt;
o If the sale is exempt from VAT, the term "VAT-EXEMPT SALE" shall be written or printed prominently on the
invoice or receipt;
o If the sale is subject to zero percent (0%) VAT, the term "ZERO-RATED SALE" shall be written or printed
prominently on the invoice receipt; and
o If the sale involves goods, properties or services some of which are subject to and some of which are zero-rated or
exempt from VAT, the invoice or receipt shall clearly indicate the breakdown of the sales price between its taxable,
exempt and zero-rated components, and the calculation of the VAT on each portion of the sale shall be shown on the
invoice or receipt.
14. Authority to Print Receipt Number at the lower left corner of the invoice or receipt.

What is the liability of a VAT-registered person in the issuance of a VAT invoice/ receipt for VAT-exempt
transactions?

If a VAT-registered person issues a VAT invoice or VAT official receipt for a VAT-exempt transaction but fails to display
prominently on the invoice or receipt the words "VAT-EXEMPT SALE", the transaction shall become taxable and the issuer shall be
liable to pay the VAT thereon. The purchaser shall be entitled to claim an input tax credit on his purchase.

What is "output tax"?

Output tax means the VAT due on the sale, lease or exchange of taxable goods or properties or services by any person registered or
required to register under Section 236 of the Tax Code.

What is "input tax"?

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Input tax means the VAT due on or paid by a VAT-registered on importation of goods or local purchase of goods, properties or
services, including lease or use of property in the course of his trade or business. It shall also include the transitional input tax
determined in accordance with Section 111 of the Tax Code, presumptive input tax and deferred input tax from previous period.

Does amortization of input VAT still allowable?

Yes , but is only allowed until December 31, 2021 after which taxpayers with unutilized input VAT on capital goods purchased or
imported shall be allowed to apply the same as scheduled until fully utilized: Provided, That in the case of purchase of services, lease
or use of properties, the input tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental,
royalty or fee.

What will be the basis of the date of cancellation?

It is the date of issuance of tax clearance by the BIR, after full settlement of all tax liabilities relative to cessation of business or
change of status of concerned taxpayer

What comprises "goods or properties"?

The term "goods or properties" shall mean all tangible and intangible objects, which are capable of pecuniary estimation and shall
include, among others:

a. Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business;
b. 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;
c. The right or privilege to use in the Philippines of any industrial, commercial or scientific equipment;
d. The right or the privilege to use motion picture films, films, tapes and discs; and
e. Radio, television, satellite transmission and cable television time.

What comprises "sale or exchange of services"?

The term "sale or exchange of services" means the performance of all kinds of services in the Philippines for others for a fee,
remuneration or consideration, whether in kind or in cash, including those performed or rendered by the following:

a. Construction and service contractors;

b. Stock, real estate, commercial, customs and immigration brokers;
c. Lessors of property, whether personal or real;
d. Persons engaged in warehousing services;
e. Lessors or distributors of cinematographic films;
f. Persons engaged in milling, processing, manufacturing or repacking goods for others;
g. Proprietors, operators or keepers of hotels, motels, rest houses, pension houses, inns, resorts, theatres, and movie houses;
h. Proprietors or operators of restaurants, refreshment parlors, cafes, and other eating places, including clubs and caterers;
i. Dealers in securities;
j. Lending investors;
k. Transportation contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for hire
and other domestic common carriers by land relative to their transport of goods or cargoes;
l. Common carriers by air and sea relative to their transport of passengers, goods or cargoes from one place in the Philippines to
another place in the Philippines;
m. Sale of electricity by generating, transmission by any entity including the National Grid Corporation of the Philippines
(NGCP), and distribution companies including electric cooperatives shall be subject to twelve percent (12%) VAT on their
gross receipts.;
n. Franchise grantees of electric utilities, telephone and telegraph, radio and/or television broadcasting and all other franchise
grantees, except franchise grantees of radio and/or television broadcasting whose annual gross receipts of the preceding year
do not exceed Ten Million Pesos (P10,000,000.00), and franchise grantees of gas and water utilities;

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 o. Non-life insurance companies (except their crop insurances), including surety, fidelity, indemnity and bonding companies;
and
p. Similar services regardless of whether or not the performance thereof calls for the exercise of use of the physical or mental
faculties.

The phrase "sale or exchange of services" shall likewise include:

a. The lease of use of or the right or privilege to use any copyright, patent, design or model, plan, secret formula or process,
goodwill, trademark, trade brand or other like property or right;
b. The lease or the use of, or the right to use of any industrial, commercial or scientific equipment;
c. The supply of scientific, technical, industrial or commercial knowledge or information;
d. 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 or any such knowledge or information;
e. The supply of services by a nonresident person or his employee in connection with the use of property or rights belonging to,
or the installation or operation of any brand, machinery or other apparatus purchased from such non-resident person;
f. 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;
g. The lease of motion picture films, films, tapes and discs; and
h. The lease or the use of or the right to use radio, television, satellite transmission and cable television time.

What is a zero-rated sale?

It is a sale, barter or exchange of goods, properties and/or services subject to 0% VAT pursuant to Sections 106 (A) (2) and 108 (B) of
the Tax Code. It is a taxable transaction for VAT purposes, but shall not result in any output tax. However, the input tax on purchases
of goods, properties or services, related to such zero-rated sales, shall be available as tax credit or refund in accordance with existing
regulations.

What transactions are considered as zero-rated sales?

The following services performed in the Philippines by VAT-registered person shall be subject to zero percent (0%) rate:

a. 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 Bangko Sentral ng Pilipinas (BSP);
b. Services other than processing, manufacturing or repacking rendered to a person engaged in business conducted outside the
Philippines or to a non-resident person engaged in business who is outside the Philippines when the services are performed,
the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP);
c. 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 percent (0%) rate;
d. Services rendered to persons engaged in international shipping or air transport operations, including leases of property for use
thereof; Provided, that these services shall be exclusively for international shipping or air transport operations. (Thus, the
services referred to herein shall not pertain to those made to common carriers by air and sea relative to their transport of
passengers, goods or cargoes from one place in the Philippines to another place in the Philippines, the same being subject to
twelve percent (12%) VAT under Sec. 108 of the Tax Code, as amended);
e. Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise
whose export sales exceeds seventy percent (70%) of total annual production;
f. Transport of passengers and cargo by domestic air or sea carriers from the Philippines to a foreign country. (Gross receipts of
international air carriers and international sea carriers doing business in the Philippines derived from transport of passengers
and cargo from the Philippines to another country shall be exempt from VAT; however they are still liable to a percentage tax
of three percent (3%) based on their gross receipts derived from transport of cargo from the Philippines to another country as
provided for in Sec. 118 of the Tax Code, as amended); and
g. Sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind,
hydropower, geothermal and steam, ocean energy, and other shipping sources using technologies such as fuel cells and
hydrogen fuels; Provided, however that zero-rating shall apply strictly to the sale of power or fuel generated through
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 renewable sources of energy, and shall not extend to the sale of services related to the maintenance or operation of plants
generating said power.

The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:

a. 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, paid 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. The sale of raw materials or packaging materials to a non-resident buyer for delivery to as a resident local export-
oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the said
buyer's goods, paid for in acceptable foreign currency, and accounted for in accordance with the rules and
regulations of the BSP;
3. The sale of raw materials or packaging materials to an export-oriented enterprise whose export sales exceed seventy
percent (70%) of total annual production;
4. Transactions considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments
Code of 1987, and other special laws; and
5. The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international air
transport operations; Provided, That the goods, supplies, equipment, and fuel shall be used exclusively for
international shipping or air transport operations; Provided, that the same is limited to goods, supplies, equipment
and fuel that shall be used in the transport of goods and passengers 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 unless the docking or
stopping at any other Philippine port 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 the mentioned in this paragraph, such portion of fuel, goods and
supplies shall be subject to twelve percent (12%) output VAT.
b. Sales to Persons or Entities Deemed Tax-exempt under Special Law or International Agreement

Sale of goods or property to persons or entities who are tax-exempt under special laws or international agreements to which the
Philippines is a signatory, such as, Asian Development Bank (ADB), International Rice Research Institute (IRRI), subject such sales
to zero rate.

What are the transactions which are no longer subject to zero-percent (0%)?

1. Sale of gold to BSP

2. Foreign-currency denominated sales

Upon the successful establishment and implementation of an enhanced VAT refund system by the Department of Finance (DOF),
what are the transactions that will now be subject to twelve percent (12%) and no longer be subject to zero percent (0%)?

1. 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, paid for
in acceptable foreign currency, and accounted for in accordance with the rules and regulations of the BSP;
2. The sale of raw materials or packaging materials to an export-oriented enterprise whose export sales exceed seventy percent
(70%) of total annual production;
3. Transactions considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of
1987, and other special laws
4. 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 Bangko Sentral ng Pilipinas (BSP); and
5. Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for
an enterprise whose export sales exceeds seventy percent (70%) of total annual production.

What transactions are considered deemed sales?

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The following transactions are considered as deemed sales:

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 VAT-registered person withdraws goods
from his business for his personal use;

a. Distribution or transfer to:

o Shareholders or investors as share in the profits of the VAT-registered person; or
o Creditors in payment of debt or obligation
b. Consignment of goods if actual sale is not made within sixty (60) days following the date such goods were consigned.
Consigned goods returned by the consignee within the 60-day period are not deemed sold;
c. 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";
o Change of ownership of the business. There is a change in the ownership of the business when a single
proprietorship incorporated; or the proprietor of a single proprietorship sells his entire business
o Dissolution of a partnership and creation of a new partnership which takes over the business.

What is VAT-exempt sale?

It is a sale of goods, properties or service and the use or lease of properties which is not subject to output tax and whereby the buyer is
not allowed any tax credit or input tax related to such exempt sale.

What are the VAT-exempt transactions?

a. 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 therefore;
b. 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 considered as pets);
c. 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 custom duties under the
Tariff and Customs Code of the Philippines;
d. Importation of professional instruments and implements, tools of trade, occupation or employment, wearing apparel,
domestic animals, and personal and household effects ( except vehicles, vessels, aircrafts machineries and other similar goods
for use in manufacture which are subject to duties, taxes and other charges) belonging to persons coming to settle in the
Philippines or Filipinos or their families and descendants who are now residents or citizens of other countries, such parties
hereinafter referred to as overseas Filipinos, in quantities and of the class suitable to the profession, rank or position of the
persons importing said items, for their own use and not barter or sale, accompanying such persons, or arriving within a
reasonable time; Provided, That the Bureau of Customs may, upon the production of satisfactorily evidence that such persons
are actually coming to settle in the Philippines and that the goods are brought from their place of residence, exempt such
goods from payment of duties and taxes.
e. Services subject to percentage tax under Title V of the Tax Code, as amended;
f. Services by agricultural contract growers and milling for others of palay into rice, corn into grits, and sugar cane into raw
sugar;
g. Medical, dental, hospital and veterinary services except those rendered by professionals;
h. Educational services rendered by private educational institutions duly accredited by the Department of Education (DepED),
the Commission on Higher Education (CHED) and the Technical Education and Skills Development Authority (TESDA) and
those rendered by the government educational institutions;
i. Services rendered by individuals pursuant to an employer-employee relationship;
j. 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 income from the Philippines;
k. Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws
except those granted under P.D. No. 529 - Petroleum Exploration Concessionaires under the Petroleum Act of 1949;

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l. Sales by agricultural cooperatives duly registered and in good standing with the Cooperative Development Authority (CDA)
to their members, as well as of their produce, whether in its original state or processed form, to non-members, their
importation of direct farm inputs, machineries and equipment, including spare parts thereof, to be used directly and
exclusively in the production and/or processing of their produce;
m. Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered and in good standing with the
Cooperative Development Authority;
n. Sales by non-agricultural, non-electric and non-credit cooperatives duly registered with and in good standing with CDA;
Provided, that the share capital contribution of each member does not exceed Fifteen Thousand Pesos (P15,000.00) and
regardless of the aggregate capital and net surplus ratably distributed among the members;
o. Export sales by persons who are not VAT-registered;
p. The following sales of real properties:
i. Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or
business.
ii. Sale of real properties utilized for low-cost housing as defined by RA No. 7279, otherwise known as the "Urban
Development and Housing Act of 1992" and other related laws, such as RA No. 7835 and RA No. 8763;
iii. Sale of real properties utilized for specialized housing as defined under RA No. 7279, and other related laws, such as
RA No. 7835 and RA No. 8763, wherein price ceiling per unit is Php 450,000.00 or as may from time to time be
determined by the HUDCC and the NEDA and other related laws;
iv. Sale of residential lot valued at One Million Five Hundred Thousand Pesos (P1,500,000.00) and below, or house and
lot and other residential dwellings valued at Two Million Five Hundred Thousand Pesos (P2,500,000.00) and below,
as adjusted using latest Consumer Price Index values. (If two or more adjacent 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 of the lots do not exceed One Million Five Hundred Thousand Pesos (P1,500,000.00). Adjacent
residential lots, although covered by separate titles and/or separate tax declarations, when sold or disposed to one
and the same buyer, whether covered by one or separate Deed of Conveyance, shall be presumed as a sale of one
residential lot.)
q. Lease of residential units with a monthly rental per unit not exceeding Fifteen Thousand Pesos (P15,000.00), regardless of
the amount of aggregate rentals received by the lessor during the year; Provided, that not later than January 31, 2009 and
every three (3) years thereafter, the amount of P10,000.00 shall be adjusted to its present value using the Consumer Price
Index, as published by the Philippine Statistics Authority (Formerly known as NSO);
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;
s. Transport of passengers by international carriers;
t. Sale, importation or lease of passenger or cargo vessels and aircraft, including engine equipment and spare parts thereof for
domestic or international transport perations; Provided, that the exemption from VAT on the importation and local purchase
of passenger and/or cargo vessels shall be subject to the requirements on restriction on vessel importation and mandatory
vessel retirement program of Maritime Industry Authority (MARINA);
u. Importation of fuel, goods and supplies by persons engaged in international shipping or air transport operations; Provided,
that the 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 unless the docking or stopping at any other Philippine port is for the purpose of unloading passengers and/or
cargoes that originated form 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 that the mentioned in the paragraph, such portion of fuel,
goods and supplies shall be subject to 12% VAT;
v. Services of banks, non-bank financial intermediaries performing quasi-banking functions, and other non-bank financial
intermediaries, such as money changers and pawnshops, subject to percentage tax under Sections 121 and 122, respectively
of the Tax Code; and
w. Sale or lease of goods and services to senior citizens and persons with disabilities, as provided under Republic Act Nos. 9994
(Expanded Senior Citizens Act of 2010) and 10754 (An Act Expanding the Benefits and Privileges of Persons with
Disability), respectively;
x. Transfer of property in merger or consolidation (pursuant to Section 40(C)(2) of the Tax Code, as amended);
y. Association dues, membership fees, and other assessments and charges collected on a purely reimbursement basis by
homeowners’ associations and condominium established under Republic Act No. 9904 (Magna Carta for Homeowners and
Homeowner’s Association) and Republic Act No. 4726 (The Condominium Act), respectively;
z. Sale of gold to the Banko Sentral ng Pilipinasn (BSP) (previously zero-rated transaction);
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 aa. Sale of drugs and medicines prescribed for diabetes, high cholesterol, and hypertension (beginning on January 1, 2019 as
determined by the Department of Health); and
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 receipts do not exceed the amount of Three Million Pesos (Php 3,000,000.00).
Note: Self-employed individuals and professionals availing of the 8% on gross sales and/or receipts and other non-operating
income, under Sections 24 (A)(2)(b) and 24 (A)(2)(c)(2) of the NIRC shall also be exempt from the payment of twelve (12%)
VAT.

What is the difference between a low-cost and a socialized housing?

“Low-cost housing” refers to housing projects intended for homeless low-income family beneficiaries, undertaken by the Government
or private developers, which may either be a subdivision or a condominium registered and licensed by the Housing and Land Use
Regulatory Board/Housing (HLURB) under BP Blg. 220, PD No. 957 or any other similar law, wherein the unit selling price is within
the selling price per unit as set by the Housing and Urban Development Coordinating Council (HUDCC) pursuant to RA No. 7279
otherwise known as the “Urban Development and Housing Act of 1992” and other laws.

“Socialized housing” refers to housing programs and projects covering houses and lots or home lots only undertaken by the
Government or private sector for the underprivileged and homeless citizens which shall include sites and services development, long-
term financing, liberated terms on interest payments, and such other benefits in accordance with the provision or RA No. 7279,
otherwise known as the “Urban Development and Housing Act of 1992” and RA No. 7835 and RA No. 8763. It 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 Lending Program (UHLP) or any equivalent housing program of the Government, the private sector or non-
government organizations.