VAT the following transactions shall be exempt from the value-added tax:

(A) Sale or importation of agricultural and marine food products in

their original state, livestock and poultry of a kind generally used as,
VAT EXEMPT TRANSACTIONS (Art. 108) or yielding or producing foods for human consumption; and breeding
These refer to the sale of goods or properties and/or services and the stock and genetic materials therefor.
use or lease of properties that is not subject to VAT (output tax) and
the seller is not allowed any tax credit of VAT (input tax) on purchases. Products classified under this paragraph shall be considered in their
original state even if they have undergone the simple processes of
The person making the exempt sale of goods, properties or services preparation or preservation for the market, such as freezing, drying,
shall not bill any output tax to his customers because the said salting, broiling, roasting, smoking or stripping. Polished and/or husked
transaction is not subject to VAT rice, corn grits, raw cane sugar and molasses, ordinary salt, and copra
shall be considered in their original state;
EXEMPT PARTY EXEMPT TRANSACTION
A person or entity granted VAT Involves goods or services which, - Polished and/or husked rice, corn grits, raw cane sugar and
exemption under the NIRC, by their nature are specifically molasses, ordinary salt and copra shall be considered as agricultural
special law or international listed in and expressly exempted food products in their original state.
agreement to which RP is a from the VAT under the NIRC, - Sugar whose content of sucrose by weight, in the dry state, has a
signatory, and by virtue of which without regard to the tax status polarimeter reading of 99.5º and above are presumed to be refined
its taxable transactions become of the parties in the transactions. sugar.
exempt from the VAT. - Raw Sugar refers to sugar produced by simple process of conversion
Such party is not subject to the Transaction is not subject to VAT, of sugar cane without a need of any of mechanical or similar device
VAT, but may be allowed a tax but the seller is not allowed any such as muscovado. For this purpose, raw sugar refers only to
refund or credit of input tax paid, tax refund or credit for any input muscovado sugar.
depending on its registration as taxes paid. - Centrifugal process of producing sugar is not in itself a simple
a VAT or non-VAT taxpayer. process. Therefore, any type of sugar produced therefrom is not
exempt from VAT
CIR v. Pilipinas Shell, G.R. no. 188497,
April 25, 2012 (B) Sale or importation of
1. fertilizers;
Oil companies are not exempt from the payment of excise tax on 2. seeds, seedlings and fingerlings;
petroleum products manufactured and sold by them to international 3. fish, prawn, livestock and poultry feeds, including ingredients,
carriers whether locally produced or imported, used in the manufacture of
finished feeds
What are exempt from VAT? - Except specialty feeds for race horses, fighting cocks, aquarium fish,
zoo animals and other animals generally considered as pets;

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(C) Importation of personal and household effects belonging to
1. residents of the Philippines returning from abroad and
2. non-resident citizens coming to resettle in the Philippines:
Provided, That such goods are exempt from customs duties under the
Tariff and Customs Code of the Philippines;
(D) Importation of
1. professional instruments and implements, tools of trade,
occupation or employment,
2. wearing apparel, domestic animals, and personal and household
effects 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 for barter or sale, accompanying such persons, or
arriving within a reasonable time:
Provided, That the Bureau of Customs may, upon the production of
satisfactory evidence that such persons are actually coming to settle
in the Philippines and that the goods are brought from their former
place of abode, exempt such goods from payment of duties and
taxes:
Provided, further, That vehicles, vessels, aircrafts, machineries and
other similar goods for use in manufacture, shall not fall within this
classification and shall therefore be subject to duties, taxes and other
charges;
(E) Services subject to percentage tax under Title V;
(F) Services by
1. agricultural contract growers, and
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2. 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;
- Laboratory services are exempted. If the hospital or clinic operates
a pharmacy or drug store, the sale of drugs and medicine is subject
to VAT.
(H) Educational services
1. rendered by private educational institutions, duly accredited by the
Department of Education (DepEd), the Commission on Higher
Education (CHED), the Technical Education and Skills Development
Authority (TESDA) and
2. those rendered by 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 under Presidential Decree No. 529;
(L) Sales by agricultural cooperatives duly registered with the
Cooperative Development Authority to their members as well as sale
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 with the Cooperative Development
Authority;
(N) Sales by non-agricultural, non-electric and non-credit
cooperatives duly registered with the Cooperative Development
Authority: Provided, That the share capital contribution of each
member does not exceed Fifteen thousand pesos (PhP15,000) and
regardless of the aggregate capital and net surplus ratably distributed
among the members;
(O) Export sales by persons who are not VAT-registered;
Rules on Export Sales
By a non-VAT registered VAT exempt
By VAT registered Vatable at 0%
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 Two million pesos
(PhP2,000,000):
Provided, further, That every three (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)
(Q) Lease of a residential unit with a monthly rental not exceeding
Fifteen thousand pesos (PhP15,000);
(R) Sale, importation, printing or publication of books and any
newspaper, magazine, review or bulletin which appears at regular
intervals with fixed prices or subscription and sale and which is not
devoted principally to the publication of paid advertisements;

NOTE: The reason is to encourage exporters of goods to register as a (S) Transport of passengers by international carriers;
VAT-registered person with the BIR to be able to claim unused input - The transport of cargo by international carriers doing business in the
tax in the form of refund or tax credit. Philippines shall be exempt from VAT as the same is subject to
If he is a VAT-registered person, his export sales are zero-rated. Common Carrier's Tax (Percentage Tax on International Carriers).
International carriers exempt under Sections 109(1)(S) and 109(1)(E) of
(P) Sale of real properties the NIRC, as amended, shall not be allowed to register for VAT
1. not primarily held for sale to customers or held for lease in the purposes (RR No. 15-15).
ordinary course of trade or business or real property utilized for low-
cost and socialized housing as defined by Republic Act No. 7279, 12% 0@ VAT EXEMPT
otherwise known as the Urban Development and Housing Act of 1992, Domestic transport International Transport of
and other related laws, of passengers or transport of passengers by
2. residential lot valued at One million five hundred thousand pesos cargoes by air and passengers or international air and
(PhP1,500,000) and below, sea cargoes by air or sea shipping carriers
3. house and lot, and other residential dwellings valued at Two million NOTE: If domestic NOTE: Transport NOTE: In case of
five hundred thousand pesos (PhP2,500,000) and below: transport of should be done by transport of cargoes,
passengers or domestic carriers the international air
Provided, That beginning January 1, 2021, the VAT exemption shall cargoes by land, the with international or shipping carrier
only apply to sale of real properties not primarily held for sale to common carrier is flights such as PAL, shall be subject to 3%
customers or held for lease in the ordinary course of trade or business, liable to percentage

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 tax on common Cebu Pacific, etc., percentage tax on
carriers otherwise, exempt 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 operations;
(U) Importation of fuel, goods and supplies by persons engaged in
international shipping or air transport operations: Provided, That the
fuel, goods, and supplies shall be used for international shipping or air
transport operations;
- Fuel is exempt if imported by persons engaged in international
shipping or air transport operations. On the other hand, fuel is zero-
rated when sold to persons engaged in international shipping or
international air transport operations without docking or stopping at
any other port in the Philippines.
(V) Services of bank, non-bank financial intermediaries performing
quasi-banking functions, and other non-bank financial
intermediaries;
- Pawnshops are not liable to pay VAT as Pawnshops are not classified
as lending investors and therefore, they are not subject to VAT. They
are subject to percentage tax
(W) Sale or lease of goods and services to senior citizens and persons
with disability, 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 pursuant to Section 40(C)(2) of the NIRC, as
amended;
(Y) Association dues, membership fees, and other assessments and
charges collected by homeowners associations and condominium
corporations;
(Z) Sale of gold to the Bangko Sentral ng Pilipinas (BSP);
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(AA) Sale of drugs and medicines prescribed for diabetes, high
cholesterol, and hypertension beginning January 1, 2019; 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 (PhP3,000,000).
NOTE: (2) A VAT-registered person may elect that Subsection (1) not
apply to its sale of goods or properties or services: Provided, That an
election made under this Subsection shall be irrevocable for a period
of three (3) years from the quarter the election was made.
Q: Is the sale of e-books and e-journals appearing at regular intervals
with fixed prices for subscription and sale and not devoted principally
to publication of paid advertisements subject to VAT?
No. The terms “book”, “newspaper,” “magazine”, “review” and
“bulletin” shall refer to printed materials in hard copies and do not
include those in digital or electronic format or computerized versions
(RMC No. 75-2012 dated November 22, 2012)
Q: Is PAGCOR’s sale of services subject to VAT?
No. In PAGCOR V. CIR [MARCH 15, 2011], the Supreme Court held that
RA 9337 only withdrew PAGCOR’s exemption from corporate income
taxes but does not contain any provision that subjects the same to
VAT. PAGCOR is exempt from the payment of VAT, because
PAGCOR's charter, P.D. No. 1869, is a special law that grants it
exemption from taxes. Moreover, the exemption of PAGCOR from
VAT is supported by Section 6 of R.A. No. 9337, which retained Section
108 (B) (3) of R.A. No. 8424, thus: 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
CIR v. PILIPINAS SHELL [G.R. 188497, APRIL 25, 2012]

DOCTRINE: Oil companies are not exempt from the payment of
excise tax on petroleum products manufactured and sold by them to
international carriers.
Section 110. Tax Credits
Output Tax means the value-added tax due on the sale or lease of
taxable goods or properties or services by (1) any person registered or
(2) required to register under Sec. 236 of the NIRC (Sec. 110[A][3],
NIRC).
Output tax is what the taxpayer-seller passes on to the purchases.
Note that what is output tax for the seller is input tax to the purchaser
(Ingles, 2015).
Output tax may come from: i. Actual sale ii. Transaction deemed sales
Input Tax means the value-added tax due on or paid by a VAT
registered person on importation of goods or local purchase of goods,
properties or services, including lease or use of properties, in the
course of his trade or business. It shall also include the transitional input
tax and the presumptive input tax determined in accordance with
Section 111 of the NIRC (Sec. 110[A][3], NIRC).
It includes input taxes which can be
1. directly attributed to transactions subject to the VAT, plus
2. a ratable portion of any input tax which cannot be directly
attributed to either the taxable or exempt activity (R.R. 16-2005).
Input tax is what is passed on to the purchaser/taxpayer by the seller.
If the purchaser is VAT-registered person, then he can use the input
tax as credit to the output taxes that he is liable to remit to the BIR
Input VAT or input tax represents the actual payments, costs and
expenses incurred by a VAT-registered taxpayer in connection with his
purchase of goods and services. On the other hand, when that person
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or entity sells his/its products or services, the VAT-registered taxpayer
generally becomes liable for 10% (now 12%) of the selling price as
Output VAT or output tax (CIR v. Benguet Corporation, G.R. No. 145559,
July 14,2006).
Effect of VAT exempt purchases to input tax
- VAT exempt transactions cannot be credited for input tax.
However, a transaction which cannot be directly attributed in
either the taxable or exempt activity, a ratable portion of the input
tax may be credited.
- Input tax not a property right under the Due Process Clause
- A VAT-registered person’s entitlement to the creditable input tax
is a mere statutory privilege which may be limited or removed by
law.
CATEGORIES OF INPUT TAX
Type of input tax Rate
Input tax on importation of goods and local 12% Standard
purchases of goods, properties and services or 0%
Presumptive input tax credit (Sec. 111[B], NIRC) – 4%
may be claimed by persons engaged in the
business of processing sardines, mackerel and milk;
manufacturing refined sugar and cooking oil; and
noodle based instant meals; all of which are
substantially produced from primary agricultural
and marine food products, the supply of which is
exempt from VAT
Transitional input tax credit (Sec. 111 [A], NIRC) – 2%
may be claimed by persons who become liable to
VAT for the first time and such represent input tax
on inventories goods, materials and supplies
existing on the date of commencement of a
person’s status as a taxable person
Withholding tax credit (Sec. 114[C], NIRC) – is 5%
based on the amount paid to the supplier of
goods or services by the government and is
 Type of input tax Rate
required to be withheld by the government to the
BIR (refer to withholding of final tax on sales to
government).
Excess input tax credit
Q: What are the sources of input tax?
Any input tax evidenced by a VAT invoice or official receipt issued in
accordance with Section 113 of the NIRC on the following
transactions shall be creditable against the output tax:
1. Purchase or importation of goods:
a. For sale; or
b. For conversion into or intended to form part of a finished product
for sale including packaging materials; or
c. For use as supplies in the course of business; or
d. For use as materials supplied in the sale of service; or
e. For use in trade or business for which deduction for depreciation or
amortization is allowed under NIRC, except automobiles, aircraft and
yachts. (Capital Goods)
2. Purchases of real properties for which a VAT has actually been paid;
3. Purchases of services in which a VAT has actually been paid (Sec.
110, NIRC);
4. Transactions “deemed sales”;
5. Presumptive input tax;
6. Transitional input tax credits allowed under the transitory and other
provisions (Sec. 4.110-1 R.R. 162005).
Capital goods (depreciable goods)
Capital goods are those goods or properties a. with an estimated
useful life of more than one year;
b. which are treated as depreciable under the income tax law;
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c. and used directly or indirectly in the production or sale of taxable
goods or services (Ingles, 2015).
Summary Rules on recognition of Input VAT for Capital Goods
Aggregate acquisition for the month > P1M, exclusive of VAT, and:
- Life > 1 year
Input tax shall be spread evenly over such useful life but not to
exceed 60 months.
- Life < 1 year
Not a capital asset. Input tax is not allocated.
Aggregate acquisition for the month < P1M, exclusive of VAT
(regardless of useful life):
The related input VAT is not allocated. Consequently, the total
amount of input VAT shall be treated as tax credit against output
VAT in the month of acquisition.
NOTE: When an asset with unamortized input tax is retired from
business, the unamortized input tax will be closed against the output
taxes during the month or quarter when the sale/disposal is made.
PERSONS WHO CAN AVAIL OF INPUT TAX CREDIT
The input tax credit on importation of goods or local purchases of
goods, properties or services by a VAT registered person shall be
creditable:
1. To the importer upon payment of the VAT prior to the release of the
goods from the customs custody;
2. To the purchaser of the domestic goods or properties upon
consummation of the sale; or
3. To the purchaser of the services or the lessee or the licenses upon
payment of the compensation, rental, royalty or fee (R.R. 16-2005).
As long as the invoices from the suppliers are issued in the name of the
taxpayer and expenses were actually incurred by the taxpayer, then
the input tax pertaining to such expenses must be credited to the
taxpayer. Where the money came from to pay these expenses is
another matter all together but it does not change the fact that input
tax has been incurred (CIR v. Sony Philippines, Inc., G.R. No. 178697,
November 17, 2010).
Section 110 (B) Excess Output or Input Tax
– If at the end of any taxable quarter the output tax exceeds the input
tax, the excess shall be paid by the VAT-registered person. If the input
tax exceeds the output tax, the excess shall be carried over to the
succeeding quarter or quarters: Provided, however, that any input tax
attributable to zero-rated sales by a VAT-registered person may at his
option be refunded or credited against other internal revenue taxes,
subject to the provisions of Section 112.21
Determination of Creditable Input Tax. – The sum of the excess input
tax carried over from the preceding month or quarter and the input
tax creditable to a VAT-registered person during the taxable month or
quarter 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.
Q: How is the creditable input tax determined?
The amount of input taxes creditable during a month or quarter shall
be determined by:
1. Adding all the creditable input taxes arising from the transactions
during the month or quarter plus any amount of input tax carried over
from the preceding month or quarter
2. Reduced by the amount of claim for VAT refund or TCC and other
adjustments such as purchase returns or allowances, input tax
attributable or allocated to exempt sales, and input tax attributable
to sales to government subject to final withholding VAT (Section 4.110-
5, RR 16-2005)
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Q: Give the three possible scenarios that may arise in computing the
VAT payable.
If at the end of any taxable month or quarter:
Output tax = input tax No VAT payable
Output tax > input tax The excess shall be paid by the VAT-registered
person
Output tax < input tax The excess shall be carried over to the
succeeding quarter or quarters
Note: If input vat results from zero-rated or effectively zero-rated
transactions, any excess over the output taxes shall be refunded to
the taxpayer or credited against other internal revenue taxes, at the
taxpayer’s option.
SECTION 111. Transitional/Presumptive Input Tax Credits
Q: What is the rule on transitional input credits?
A person who becomes liable to VAT or any person who elects to be
VAT-registered shall, subject to the filing of an inventory, be allowed
input tax on his beginning inventory of goods, materials and supplies
equivalent to 2% of the value of such inventory or the actual VAT paid
on such goods, materials and supplies, whichever is higher, which shall
be creditable against the output tax.
Q: What is the rule on presumptive input tax credits?
Persons or firms engaged in the processing of sardines, mackerel and
milk, and in the manufacturing or refined sugar, cooking oil and
packed noodle-based instant meals, shall be allowed a presumptive
input tax, creditable against the output tax, equivalent to 4% of the
gross value in money of their purchases of primary agricultural
products which are used as inputs to their production.
FORT BONIFACIO DEVELOPMEN CORPORATION V. CIR, G.R. NO.
173425, SEPTEMBER 4, 2012

DOCTRINE: Prior payment of taxes is not required for a taxpayer to
avail of the 8% transitional input tax credit.
Q: Who may avail of input tax credit?
1. The importer upon payment of VAT prior to the release of goods
from customs custody
2. The purchaser of the domestic goods or properties upon
consummation of the sale
3. The purchaser of services of the lessee or licensee upon payment
of compensation, rental, royalty or fee 4. Purchaser of real property
under cash/deferred payment basis upon consummation of the sale
or if upon instalment basis upon every instalment payment (Section
4.110-2, RR 16-2005)
Section 112. Refunds or Tax Credits of Input Tax
Who may claim for refund/apply for issuance of tax credit certificate?
The following can avail of refund or tax credit:
1. Zero-rated and effectively zero-rated sales - Any VAT-registered
person, whose sales are zero-rated or effectively zero-rated (Sec. 112
[A]).
2. Cessation of business or VAT status - A person whose registration has
been cancelled due to retirement from or cessation of business, or
due to changes in or cessation of status under Section 106(C) of NIRC
(Sec. 112[B]).
Q: What are the requirements for a claim for VAT refund/credit?
1. The taxpayer is engaged in sales which are zero-rated or effectively
zero-rated ;
2. The taxpayer is VAT-registered
3. The claim must be filed within two years after the close of the
taxable quarter when such sales were made
4. The input taxes are due or paid;
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5. The input taxes are not transitional input taxes
6. The input taxes have not been applied against output taxes during
and in the succeeding quarters
7. The input taxes claimed are attributable to zero rated or effectively
zero-rated sales
8. In certain types of zero-rated sales, the acceptable foreign
currency exchange proceeds thereof had been duly accounted for
in accordance with BSP rules and regulations [Sections 106(A)(2)(a)(1)
and (2); Section 106(B); Sections 108(B)(1) and (2)]
9. Where there are both zero-rated or effectively zero-rated sales and
taxable or exempt sales, and the input taxes cannot be directly and
entirely attributable to any of these sales, the input taxes shall be
proportionately allocated on the basis of sales volume. (See INTEL
TECHNOLOGY PHILIPPINES V. CIR [APRIL 27, 2007])
Period to file claim for refund/apply issuance of tax credit certificate
The claim, which must be in writing, for both cases, must be filed within
2 years after the close of the taxable quarter when the sales were
made.
Reckoning point for the Two (2)-year period
1. Zero-rated or effectively zero rated sales – Any VAT-registered
person, whose sales are zero-rated or effectively zero-rated may,
within two (2) years after the close of the taxable quarter when the
sales were made (Sec. 112(A), NIRC).
- The two-year period should be reckoned from the close of the
taxable quarter when the relevant sales were made pertaining to the
input VAT regardless of whether said tax was paid or not (CIR vs Mirant
Pagbilao Corporation, GR 172129, September 12, 2008).
- Thus, when a zero-rated VAT taxpayer pays its input VAT for the
purchase from its supplier a year after the pertinent transaction of its
sale to its purchaser, the said taxpayer only has a year to file claim for
refund or tax credit of the unutilized creditable input VAT (Ingles,
2015).
In case the taxpayer is engaged in zero-rated and also in taxable or
exempt sale, and the amount of creditable input tax due or paid
cannot be directly and entirely attributed to any one of the
transactions, it shall be allocated proportionately on the basis of the
volume of sales.
2. Cessation of business or VAT status - The person may, within two (2)
years from the date of cancellation, apply for the issuance of a tax
credit certificate for any unused input tax which may be used in
payment of his other internal revenue taxes (Sec. 112(B), NIRC)
Period within which BIR Commissioner grants Tax Credit
Certificates/refund for creditable input taxes
- In proper cases, the Commissioner shall grant a refund for
creditable input taxes within ninety (90) days from the date of
submission of the official receipts or invoices and other
documents in support of the application filed in accordance with
Subsections (A) and (B) hereof:
Provided, That should the Commissioner find that the grant of
refund is not proper, the Commissioner must state in writing the
legal and factual basis for the denial.
- In case of full or partial denial of the claim for tax refund, the
taxpayer affected may, within thirty (30) days from the receipt of
the decision denying the claim, appeal the decision with the Court
of Tax Appeals: Provided, however, That failure on the part of any
official, agent, or employee of the BIR to act on the application
within the ninety (90)-day period shall be punishable under
Section 269 of this Code.
Q: What is the Manner of Giving Refunds?
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Refunds shall be made upon warrants drawn by the Commissioner or
by his duly authorized representative without the necessity of being
countersigned by the Chairman, Commission on Audit, the provisions
of the Administrative Code of 1987 to the contrary notwithstanding:
Provided, That refunds under this paragraph shall be subject to post
audit by the Commission on Audit.
Section 113. Invoicing and Acounting Requirements for VAT
Registered Persons
Q: What are required to be issued by a VAT registered person?
1. VAT invoice – for every sale, barter or exchange of goods or
properties
2. VAT official receipt – for every lease of goods or properties and for
every sale, barter or exchange of services.
Note: Only VAT-registered persons are required to print their Tax
Identification Number (TIN) followed by the word “VAT” in their invoice
or official receipt, which shall be considered the VAT invoice or VAT
official receipt. All purchases not covered by invoices/receipts other
than the VAT invoice or VAT official receipt shall not give rise to any
input tax (see Section 4.113-1(A), RR 16-2005]
Q: Is there a difference between an invoice and official receipt for
purposes of substantiation?
In KEPCO PHILIPPINES V. CIR [NOVEMBER 24, 2010], in ruling on Kepco’s
contention that an invoice and an official receipt are
interchangeable, the Supreme Court stated that only a VAT invoice
might be presented to substantiate a sale of goods or properties,
while only a VAT receipt could substantiate a sale of services. The VAT
invoice is the seller’s best proof of the sale of the goods or services to
the buyer while the VAT receipt is the buyer’s best evidence of the
payment of goods or services received from the seller. Even though
VAT invoices and receipts are normally issued by the supplier/seller
alone, the said invoices and receipts, taken collectively, are
necessary to substantiate the actual amount or quantity of goods sold
and their selling price (proof of transaction), and the best means to
prove the input VAT payments (proof of payment). Hence, VAT
invoice and VAT receipt should not be confused as referring to one
and the same thing. Certainly, neither does the law intend the two to
be used alternatively
Note: The unamended Section 113 did not distinguish between an
invoice and a receipt when used as evidence of a zero-rated
transaction. Thus, in the case of transactions which took place during
the period of the unamended law, the Court could accept either or
both of the documents as evidence of zero-rated transactions
(SOUTHERN PHILIPPINES V. CIR [OCTOBER 19, 2011]; AT&T
COMMUNICATIONS SERVICES PHILIPPINES V. CIR [AUGUST 3, 2010]
Q: What are the consequences of issuing erroneous VAT invoices or
VAT official receipts?
1. If a person who is not VAT-registered issues an invoice or receipt
showing his TIN, followed by the word “VAT”, the erroneous issuance
shall result to the following:
a) The Non-VAT person shall be liable to the:
i. percentage taxes applicable ii. VAT due on the transactions without
the benefit of any input tax credit iii. 50% surcharge as penalty
b) The VAT shall, if the other requisite information required is shown on
the invoice or receipt, be recognized as an input tax credit to the
purchaser.
2. 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 term “VAT-exempt Sale,” the issuer shall be
liable to account for the VAT imposed. The purchaser shall be entitled
10 | P a g e
to claim an input tax credit on said purchase. (see Section 4.113-4, RR
16-2005)
Note: Failure or refusal to comply with the requirement that the
amount of tax shall be shown as a separate item in the invoice or
receipt shall, upon conviction, for each act or omission, be punished
by a fine of not less than P1,000 but not more than P50,000 and suffer
imprisonment of not less than 2 years but not more than 4 years (RR
18-2011 [November 21, 2011])
Q: What is the effect of the failure to comply with the invoicing
requirements on the claim for refund or credit of input VAT on
zerorated sales?
The claim for refund of unutilized or excess input taxes on the alleged
zero-rated sales will be denied. The invoicing requirements are
mandatory and the failure to comply is fatal in claims for a refund or
credit of input VAT on zero-rated sales. (SILICON PHILIPPINES V. CIR
[JANUARY 21, 2011].
See also MICROSOFT PHILIPPINES V. CIR [APRIL 6, 2011]; PANASONIC
COMMUNICATION IMAGING CORP V. CIR [FEBRUARY 8, 2010]; JRA
PHILIPPINES V. CIR [OCTOBER 11, 2010]; HITACHI GLOBAL STORAGE
TECHNOLOGIES PHILIPPINES CORP V. CIR [OCTOBER 20, 2010]; KEPCO
PHILIPPINES CORP V. CIR [NOVEMBER 24, 2010].
Q: Kepco filed a claim for refund of unutilized input VAT based on its
zero-rated sale of power to NAPOCOR. A substantial portion of the
claim was denied for having been supported by VAT invoices which
only had the TIN-VAT stamped and not printed. Is Kepco entitled to
the claim for refund?
No. In KEPCO PHILIPPINES V. CIR [NOVEMBER 24, 2010], the Supreme
Court ruled that the requirement that the TIN be imprinted and not
merely stamped is a reasonable requirement imposed by the BIR.. The
failure to adhere to this rule will not only expose the taxpayer to
penalties but should also serve to disallow the claim.
Section 114. Return and Payment of VAT
account of each purchase of goods or services subject to VAT,
deduct and withhold a final VAT equivalent to 5% of the gross
payment thereof provided that the payment for lease or use of
properties or property rights to non-resident owners shall be subject to
10% withholding tax at the time of payment. (Section 4.114-2, RR 16-
2005

Q: Who are required to file a VAT return?

Every person liable to pay the value-added tax imposed under this
Title shall file a quarterly return of the amount of his gross sales or
receipts within twenty-five (25) days following the close of each
taxable quarter prescribed for each taxpayer: Provided, however,
That VAT-registered persons shall pay the value-added tax on a
monthly basis: Provided, finally, That beginning January 1, 2023, the
filing and payment required under this Subsection shall be done within
twenty-five (25) days following the close of each taxable quarter.

Any person, whose registration has been cancelled in accordance

with Section 236, shall file a return and pay the tax due thereon within
twenty-five (25) days from the date of cancellation of registration:
Provided, That only one consolidated return shall be filed by the
taxpayer for his principal place of business or head office and all
branches

Q: Where to File the Return and Pay the Tax.

– Except as the Commissioner otherwise permits, the return shall be
filed with and the tax paid to an authorized agent bank, Revenue
Collection Officer or duly authorized city or municipal Treasurer in the
Philippines located within the revenue district where the taxpayer is
registered or required to register.

Q: What is the rule on withholding of VAT by government agencies?

The government or any of its political subdivisions, instrumentalities or
agencies, including GOCCs, shall, before making payment on

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