TRANSACTIONS OF VAT REGISTERED BUSINESS:

REGULAR VATABLE , X 12% - Creditable INPUT VAT Main Business

SALES VAT EXEMPT , X 0% - NO Creditable INPUT Incidental Transactions

ZERO Rated , X 0% - Creditable INPUT VAT Export Sales

Directly Identifiable to each type of sale

INPUT VAT
Payments Not Identifiable, Allocated to each type of sale using the amount of sale as the basis
VATABLE SALES VAT is imposed upon any person who, in the course of trade or
business, sells, barters, exchanges, leases goods or properties, and renders services,
and any person who imports goods as provided under Section 105 of the National
Internal Revenue Code,
Sales of Ordinary Assets:as amended.
• property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or
business, or
• property used in the trade or business, of a character which is subject to the allowance for depreciation
provided in Subsection (F) of Section 34; or real property used in trade or business of the taxpayer. (NIRC
8424, SEC 39A)
Revenue Regulations No. 7-2003, Real Property included in Ordinary Assets:
• Stock in trade of a taxpayer or other real property of a kind which would properly be included in the
inventory of the taxpayer if on hand at the close of the taxable year; or
• Real property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or
business; or
• Real property used in trade or business (i.e ., buildings and/or improvements) of a character which is
subject to the allowance for depreciation provided under Sec. 34(F) of the National Internal Revenue
Code (NIRC) of 1997, as amended; or
• Real properties used in trade or business of the taxpayer; or
• In the case of banks, real properties acquired through foreclosure sale after redemption period expires,
bank mortgagee/seller is liable to VAT.

Donation of an “ordinary asset” used in business by a VAT-registered person shall be

considered transaction "deemed sale", hence, subject to VAT if the donor-taxpayer is a
VAT EXEMPT (sales to Senior and PWDs)

RA 109754 Section 6. Twenty Percent (20%) Discount and Value Added Tax (VAT) Exemption

Section 6.1 Lodging Establishment

Section 6.2 Restaurants

Section 6.3 Recreation Centers

Section 6.4 Purchase of Medicines and Foods for Special Medical Purposes

Section 6.5 Medical and Dental Services, Diagnostic and Laboratory Fees and Professional Fees of Attending Doctors

Section 6.6 Domestic Air and Sea Travel

Section 6.7 Land Transportation Travel

Section 6.8 Funeral and Burial Services for the Death of a Person with Disability
VAT EXEMPT

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;

EXEMPT under Rev Reg 7-2010

a. Medicines, including influenza and pneumococcal vaccines, and such other essential medical supplies, accessories
and equipment
b. On professional fees of attending physician/s in all private hospitals, medical facilities, outpatient clinics and home
health care services
c. On professional fees of licensed professional health workers
d. On medical and dental service, diagnostic and laboratory fees in all private hospitals, medical facilities, outpatient
clinics and home health care services
e. In actual fare for land transportation Travel in public utility buses, public utility jeepneys, taxis, Asian utility vehicles,
shuttle service and public railways, including light rail transit, mass railway transit and Philippine national railways
f. On actual transportation fare for domestic air transport services and shipping vessels
g. Utilization of services in hotels and similar lodging establishments, restaurants and recreation centers
h. On Admission fees charged by theaters, cinema houses and concert halls, circuses, carnivals, and other similar
places of culture, leisure and amusement
i. On funeral and burial services for the death of Senior Citizen
 VAT SYSTEM
2550Q

Actual Sales, P500,00 x12% = P60,000

12% OUTPUT VAT, Deemed Sales, P100,000 x12% = 12,000
Total P72,000
Less: Creditable INPUT VAT
On Purchases of goods and services from VAT person,P500,000 x 12% = 60,000

NET VAT DUE P 12,000

LESS: Creditable Withholding tax, 2307 ( 5% on transaction w/ govt units) 5,000

NET VAT PAYABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000

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 as VAT under
Section 236 of the Tax Code.

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.

OTHER SOURCES OF CREDITABLE INPUT VAT:

 12% of importation (in general, all importations are liable to Philippine VAT)

 4% presumptive INPUT VAT of agri-food product prime materials

 1.5% on contract price for public work contractors on contract with govt, RR 6-97
( in lieu of actual INPUT VAT)

 2% Transitional INPUT VAT on beginning inventory as 1st time VAT business

APPLICATION OF CREDITABLE INPUT VAT:
 Directly identifiable as Tax credit to related OUTPUT VAT
 Distributable to different types of VAT Sales/Gross Receipts

A VAT-registered person who is also engaged in transactions not subject to VAT shall be allowed of Input Tax
credit as follows;

 Total Input Tax which can be directly attributed to transactions subject to VAT; and

 A ratable portion of any Input Tax which cannot be directly attributed to either activity. (Sec. 110A3, NIRC;
Sec. 4.110-4, R.R.14-2005)

 Where the taxpayer is engaged in VAT taxable, Zero-rated and VAT-exempt sale of goods or services,
and the amount of creditable input tax could not directly and entirely attributed to a specific
transaction, the Input VAT shall be allocated proportionately on the basis of the sales volume.
REVENUE REGULATIONS 21-2021
A ZERO RATE SALES by VAT registered person is a taxable transaction for VAT purposes
but shall not result in any output tax. However, the input tax on purchases of goads,
properties, or services attributable to such zero rated sale, shall be available as credit or refund

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

Export Sales:
{1) The sale and actual shipment of goods from the Philippines to foreign country, 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); and

{2) The sale goads, supplies, equipment, and fuel to persons engaged in international shipping or
international or international air transport operation; Provided, That the qoods, supplies,
equipment, and fuel shall be used exclusively for international shipping or air transport
operations.
Sales to persons or entities whose exemption from direct and indirect taxes under special laws or
international agreements to which the Philippines is a signatory effectively subject such sales to
zero rate;
The following services performed in the Philippines by a VAT-registered person shall be subject to zero
percent (O%) VAT rate:

{1) Services other than processing, manufacturing and repacking of goods rendered to a person engaged in
business conducted outside the Philippines or to a non-resident person not 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 BSP;

(2) Services rendered to persons or entities whose exemption from direct and indirect taxes under special
laws or international agreements to which the Philippines is a signatory, effectively subjects the supply of
such services to zero percent rate;
(3) Sale of services, including provision of basic infrastructure, utilities, and maintenance, repair and
overhaul of equipment to a registered export enterprise (RBEs), to be used directly and exclusively in its
registered activity for a maximum period of seventeen (17) years from the date of registration, unless
otherwise extended under the SIPP, Provided, That the term registered export enterprise" shall refer to an
export enterprise as defined under the CREATE lRR that is also a registered business enterprise as defined
in Section 4 (W) of the same lRR: Provided further. That the above-described sales to existing registered
export enterprises located inside ecozones and freeport zone shall be qualified for VAT zero rating until the
expiration of the transitory period.(VAT Zero-Rate Certificate to be issued by the IPA to its compliant
REEs is prescribed under RMC No. 36-2022.)

(4) 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 land sea relative to their transport af 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. 708 of the Tax Code.
(5) Transport of passengers and cargo by domestic air or sea vessels from the Philippines to a foreign
country. Gross receipts of international air or shipping 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 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. 1i.8 af the Tox Code;

{6) 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 emerging sources
using technologies such as fuel cells and hydrogen fuels: Provided, however, that zero-rating shall
apply strictly to the sole of power or fuel generated through renewable sources a! energy, and shall
not extend to the sale al services related ta the maintenance or operation of plants generating said
power
VAT on sale of goods to PEZA RBEs

Locally purchased goods and services that are directly and

exclusively used in the registered project or activity of the RBE,
supported with VAT Zero-Rate Certification/Endorsement by
appropriate government agency (IPA)
RMC No. 36-2022.

The VAT zero-rating certification shall be applied with the concerned IPA following
BIR Revenue Memorandum Circular (RMC) No. 36-2022. For counterchecking
purposes, the BIR shall rely on the master list and VAT zero rate indorsement of
covered RBEs, which the concerned IPA shall submit to BIR.
VAT on sale of services to PEZA RBEs

With the passage of CREATE, only those local purchase of goods and services that are directly and exclusively used
in the registered projects or activities of RBEs shall qualify as VAT zero-rated local purchases. (RMC 24-2022)

RMC 80-2023,Local purchases of goods and services relating to the following shall not be
considered as “directly and exclusively used” in the registered activity of a registered
export enterprise:
1.Janitorial services;

2.Security services;

3.Financial services;

4.Consultancy services;

5.Marketing and promotion; and

6.Services rendered for administrative operations such as Human Resources (HR), legal,
and accounting.