Taxable transactions 1.

Persons liable Any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value added tax (VA ! imposed in "ections 1#$ to 1#% of this code. &. 'ature of the tax Value added tax is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferred or lessee of the goods, properties or services. his rule shall li(ewise apply to existing contracts of sale or lease of goods, properties or services at the time of the effectivity of )epublic Act **1$. +. ,n the course of trade or business his means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a non-stoc(, non-profit private organi.ation (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests!, or government entity. "ervice as defined in this /ode rendered in the Philippines by non-resident foreign persons shall be considered as being rendered in the course of trade or business. 0. "ale of 1oods or Properties here shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value added tax e2uivalent to ten percent (1#3! of the gross selling price or gross value in money of goods or properties sold, bartered or exchange, such tax to be paid by the seller or transferor4 Provided, that the president, upon recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent 12!", after any of the followin# conditions has $een satisfied% a& b. 5. 'alue (dded )ax collection as a percenta#e of *ross +omestic Product *+P" of the previous year exceeds two and four-fifth percent 2 ,-.!"/ or 0ational #overnment deficit as a percenta#e of *+P of the previous year exceeds one and one-half percent 1 1!"&(As amended by REPUBLIC ACT NO. 9337!.

1oods or Properties6"ale or exchange of "ervices he terms 1oods or properties shall mean all tangible and intangible objects which are capable of pecuniary estimation and shall include4 2eal properties held primarily for sale to customers or held for lease in the ordinary course of trade or $usiness (subject to the exemption under "ection 1#7(w! 8 (x!!9 - (1! "ale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business (&! or real property utili.ed for low-cost housing as defined by )epublic Act 'o. *&*7, otherwise (nown as the :rban ;evelopment and <ousing Act of 177&, (+! and other related laws, house and lot and other residential dwelling valued at =ne >illion pesos (P1,###,###.##! and below4 Provided, that not later than ?anuary +1 st of the calendar year subse2uent to the effectivity of this Act and shall be adjusted to its present value using the /onsumer Price ,ndex, as published by the 'ational "tatistic =ffice ('"=!4 @ease of residential unit with a monthly rental not exceeding Aight housand Pesos (P%,###.##! provided that not later than ?anuary +1 st of the calendar year subse2uent to the effectivity of this Act and shall be adjusted to its present value using the /onsumer Price ,ndex, as published by the 'ational "tatistic =ffice ('"=!

)he ri#ht or the privile#e to use patent, copyri#ht, desi#n or model plan, secret formula or process, #oodwill, trademar3, trade $rand or other li3e property or ri#ht )he ri#ht or privile#e to use in the Philippines of any industrial, commercial or scientific e4uipment )he ri#ht or privile#e to use motion picture films, films, tapes and discs/ and

2adio, television, satellite, transmission and ca$le television time

he phrase Bsale or exchange of servicesC means the performance of all (inds of services in the Philippines for others for a fee, remuneration or consideration, including those performed or rendered by4 o o o o o o o o o o o o o o o o /onstruction and service contractors9 "toc(, real estate, commercial, customs and immigration bro(ers9 @essors of property, whether personal or real9 Darehousing services9 @essors or distributors of cinematographic films9 Persons engaged in milling, processing, manufacturing or repac(ing goods for others9 Proprietors, operators or (eepers of hotels, motels, resthouses, pension houses, inns, resorts9 Proprietors or operators of restaurants, refreshment parlors, cafes and other eating places, including clubs and caterers9 ;ealers in securities9 @ending investors9 ransportation 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 cargoes9 /ommon 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 Philippines9 "ales of electricity by generation companies, transmission, and distribution companies9 "ervices of franchise grantees of electric utilities, telephone and telegraph, radio and television broadcasting and all other franchise grantees except those under "ection 117 of this /ode and 'on-life insurance companies (except their crop insurance! including surety, fidelity, indemnity and bonding companies9 and similar services regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties.

he phrase Bsale or exchange of servicesC shall li(ewise include4 o o o o he lease or the use of or the right or privilege to use any copyright, patent, design or model, plan, secret formula or process, goodwill, trademar(, trade brand or other li(e property or right9 he lease or the use of, or the right to use of any industrial, commercial or scientific e2uipment9 he supply of scientific, technical, industrial or commercial (nowledge or information9 he 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 as is mentioned in subparagraph (&! or any such (nowledge or information as is mentioned in subparagraph (+!9 he 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 nonresident person9 he supply of technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial underta(ing, venture, project or scheme9 he lease of motion picture films, films, tapes and discs9 and he lease or the use of or the right to use radio, television, satellite transmission and cable television time. @ease of properties shall be subject to the tax herein imposed irrespective of the place where the contract of lease or licensing agreement was executed if the property is leased or used in the Philippines. The term GROSS RECEIPTS E means the total amount of money or its e2uivalent representing the contract price, compensation or service fee, rental or royalty including the amount charged for materials supplied with the services and deposits or advance payments actually or constructively received during the taxable 2uarter for the services performed or to be performed for another person, excluding Value-added tax.

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1ross "elling Price ( ax Fase! >eans the total amount of money or its e2uivalent which the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or exchange of the goods or properties, excluding the value added tax. The excise tax, if any, on such goods or properties shall form part of the gross selling price.

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,nvoicing )e2uirements (,nvoicing of sale! A VA - )egistered person shall, for every sale, issue an invoice or receipt. ,n addition to the information re2uired under "ection &+*, the following information shall be indicated in the invoice or receipt A statement that the seller is a VA -registered person, followed by his taxpayerCs identification no. ( ,'!9 he total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax. ax Gormula he tax shall be computed by multiplying the total amount indicated in the =fficial receipt by one-eleventh (1611! ( his provision which used to be 1#$ (;! (1! was removed6repealed under REPUBLIC ACT NO. 9337! "ales )eturns, Allowances and "ales ;iscounts E he value of goods or properties sold and subse2uently returned or for which allowances were granted by a VA -registered person may be deducted from the gross sales or receipts for the 2uarter in which a refund is made or a credit memorandum or refund is issued. "ale discount granted and indicated in the invoice at the time of sale and the grant of which does not depend upon the happening of a future event maybe excluded from the gross sales within the same 2uarter it was given. ,f the taxpayer is not registered and has not been collecting VA but is re2uired by law to collect VA the formula shall be the gross amount indicated in the =fficial receipt by 1#3

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,nput tax formula ,nput tax is computed by multiplying the gross receipted amount by 1611 of a purchase made by a buyer. ,nput tax is Vat for the buyer and it is prepayment of tax to the buyer.

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=utput tax formula =utput tax is computed by multiplying the gross receipted amount by 1611 of a sale made by a seller. =utput tax is Vat for the seller and the same is a liability.

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Hero percent (# 3! rate VA sale here are two groups of .ero rated sales and the same are (a! export sales (b! and Goreign /urrency ;enominated sales. <ere are the e!"ort #ale#, to wit4 he 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 "ale of raw materials or packaging material to a nonresident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing, processing, pac(ing or repac(ing in the Philippines of the said buyerCs goods and paid for in acceptable foreign currency and accounted for in accordance with the rules and regulation of the Banko Sentral ng Pilipinas (F"P! "ale of raw materials or packaging materials to export-oriented enterprise whose export sales exceed seventy percent !"#$ of total amount production9

"ale of gold to the Banko Sentral ng Pilipinas (F"P! hose considered export sales under %xecutive &rder 'o( ))* , otherwise (nown as the =mnibus ,nvestment /ode of 17%*, and other special laws+ and The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international air transport operations( (As amended by REPUBLIC ACT NO. 9337!.

Goreign currency denominated sales means sale to a nonresident of goods, except those mentioned in "ections 107 (automobiles! and 15# (non-essential goods!, 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 F"P 1&. ransitional ,nput ax his exists when a person who becomes liable to value-added tax or any person who elects to be a VA -registered person shall, subject to the filing of an inventory according to rules and regulations prescribed by the "ecretary of Ginance, upon recommendation of the /ommissioner, be allowed input tax on his beginning inventory of goods, materials and supplies equivalent to eight percent ,#$ of the value of such inventory or the actual value-added tax paid on such goods, materials and supplies which is higher, which shall be creditable against the output tax. 1+. Presumptive ,nput ax his VA rule is only applicable to the following persons or firms engaged in the processing of "ardines >ac(erel >il(

And those that are engaged in the manufacturing of )efined "ugar /oo(ing oil

Presumptive input tax is e2uivalent to one and one-half percent (1-16&3! of the gross value in money of their purchases of primary agricultural products which are used as inputs to their production. And those who are public wor(s contractors shall be allowed a presumptive input tax e2uivalent to one and one-half percent (1-16&3! of the contract price with respect to government contracts only in lieu of actual input taxes therefrom. 10. Processing >ean pasteuri-ation, canning and activities which through physical or chemical process alter the exterior texture or form or inner substance of a product in such manner as to prepare it for special use to which it could not have been put in its original form or condition 15. Primarily agricultural products A1),/:@ :)A@ P)=;:/ "I ;AG,'A;. J I he common parlance of the country, and the common practice of the country have been to consider all those things as farming products or agricultural products which and the situs of their production upon the farm, and which were brought into condition for the uses of society by the labor of those engaged in agricultural pursuits, as contra-distinguished from manufacturing or other industrial pursuits.I (;istrict of /olumbia vs. =yster K1%%5L, 50 Am )ep., &*5.! he term Iagricultural productsI has been held to include swine, horses, meat, cattle, sheep, manure, cord wood, hay, poultry, vegetables, fruit, eggs, mil(, butter, and lard J but no fish. ,;9 ,;. J Gish are not an agricultural product. (>olina vs. )afferty E 1) @-117%% #+* Phil 505 1$. )ecording of value added taxes in the boo(s of accounts All persons subject to the value-added tax under "ections 1#$ and 1#% shall, in addition to the regular accounting records re2uired, maintain a subsidiary sales journal and subsidiary purchase journal on which the daily sales and purchases are recorded. he subsidiary journals shall contain such information as maybe re2uired by the "ecretary of Ginance.

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)eturn and payment 1eneral )ule4 Avery person liable to pay the value-added tax imposed under this title shall file a 2uarterly return of the amount of his gross sales or receipts within twenty-five (&5! days following the close of each taxable 2uarter prescribed for each taxpayer4 Provided, however, hat VA registered persons shall pay the value-added tax on a monthly basis. Any person, whose registration has been cancelled in accordance with "ection &+$ shall file a return and pay the tax due thereon within twenty-five (&5! days from the date of cancellation of registration4 Provided, hat only one consolidated return shall be filed by the taxpayer for his principal place of business or head office and all branches.

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Dhere to file the return and pay the tax Axcept as the /ommissioner otherwise permits, the return shall be filed with and the tax paid to an authori.ed agent ban(, )evenue /ollection =fficer or duly authori.ed city or municipal treasurer in the Philippines located within the revenue district where the taxpayer is registered or re2uired to register.

17.

ransactions ;eemed "ale he following transactions shall be deemed sale4 ransfer, 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 ;istribution or transfer to o o "hareholders or investors as share in the profits of the VA -registered persons /reditors in payment of debt

/onsignment of goods if actual sale is not made within sixty ($#! days following the date such goods were consigned )etirement from or cessation of business, with respect to inventories of taxable goods existing as of such retirement or cessation.

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"ale or exchange of services >eans the performance of all (inds of services in the Philippines for others for a fee, remuneration or consideration, including those performed or rendered by /onstruction and service contractors9 "toc(, real estate, commercial, customs and immigration bro(ers9 @essors of property, whether personal or real9 Darehousing services9 @essors or distributors of cinematographic films9 Persons engaged in milling, processing, manufacturing or repac(ing goods for others9 Proprietors, operators or (eepers of hotels, motels, resthouses, pension houses, inns, resorts9 Proprietors or operators of restaurants, refreshment parlors, cafes and other eating places, including clubs and caterers9 ;ealers in securities9 @ending investors9 ransportation contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for hire and other domestic common carriers by land, air and water relative to their transport of goods or cargoes9 "ervices of franchise grantees of telephone and telegraph, radio and television broadcasting and all other franchise grantees except those under "ection 117 of this code (those who annul gross receipts in the preceding year does not exceed P1#,###,###.##! 'on-life insurance companies (except cargo insurances!including surety, fidelity, indemnity and bonding companies And similar services regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties. ,t shall li(ewise include4

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he lease or the use of or the right or privilege to use any copyright, patent, design or model, plan, secret formula or process, goodwill, trademar(, trade brand or other li(e property or right9 he lease or the use of, or the right to use of any industrial, commercial or scientific e2uipment he supply of scientific, technical, industrial or commercial (nowledge or information he 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 as is mentioned in subparagraph (&! or any such (nowledge or information as is mentioned in subparagraph (+! he supply of services by a non-resident 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 form such non-resident person he supply of technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial underta(ing, venture, project or scheme he lease of motion picture films, films, tapes and discs he lease or the use of or the right to use radio, television, satellite transmission and cable television time

@ease of properties @ease of properties shall be subject to the tax herein imposed irrespective of the place where the contract of lease or licensing agreement was executed if the property is leased or used in the Philippines

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1ross receipts ,s the total amount of money or its e2uivalent representing the /ontract price /ompensation "ervice fee )ental or royalty

,ncluding the amount charged for materials supplied with the services deposits advanced payments

actually or constructively received during the taxable 2uarter for the services performed or to be performed for another person excluding value added tax &+. ,nput tax >eans the value added tax due from or paid by a VA -registered person in the course of his trade or business on importation of goods or local purchase of goods or services, including lease or use of property, from a VA -registered person. ,t shall also include the transitional input tax determined in accordance with "ection 111 of this /ode &0. =utput tax >eans the value-added tax due on the sale or lease of taxable goods or properties or services by any person registered or re2uired to register under "ection &+$ of this /ode &5. ;etermination of /reditable ,nput tax he sum of the excess input tax carried over from the preceding month or 2uarter and the input tax creditable to a VA -registered person during the taxable month or 2uarter shall be reduced by the amount of claim for refund or tax credit for value added tax and other adjustments, such as purchase returns or allowances and input tax attributable to exempt sale. &$. Value Added ax on ,mportation of 1oods. Fase Amount shall be computed by multiplying 1#3 to the sum of the following4

otal Value used by the Fureau of /ustoms in determining tariff and customs duties /ustoms duties Axcise taxes, if any And other charges, such tax to be paid by the importer prior to the release of such goods from customs custody9 Provided, that where the customs duties are determined on the basis of the 2uantity or volume of the goods, the value added tax shall be based on4 o he landed cost plus excise taxes, if any

Provided, further, that the President, upon recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent 12!", after any of the followin# conditions has $een satisfied% a& $& 'alue (dded )ax collection as a percenta#e of *ross +omestic Product *+P" of the previous year exceeds two and four-fifth percent 2 ,-.!"/ or 0ational #overnment deficit as a percenta#e of *+P of the previous year exceeds one and one-half percent 1 1!"&(As amended by REPUBLIC ACT NO. 9337!.

ransfer of 1oods by ax-exempt Persons. ,n the case of tax-free importation of goods into the Philippines by persons, entities or agencies exempt from tax where such goods are subse2uently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the purchasers, transferees or recipients shall be considered the importers thereof, who shall be liable for any internal revenue tax on such importation. he tax due on such importation shall constitute a lien on the goods superior to all charges or liens on the goods, irrespective of the possessor thereof. &*. Axempt transactions under VA ("ection 1#7!