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Consolidated Revenue Regulations 07-95 COVERAGE, NATURE, BASIS AND RATE OF VALUE-ADDED TAX (VAT)
SECTION [4.99-1] 4.105-1PERSONS LIABLE Any person who, in the course of his trade or business, sells, barters, exchanges or leases goods or properties, or renders services, and any person who imports goods shall be liable to VAT imposed in Sections 100 to 102 of the Code. However, in the case of importation of taxable goods, the importer, whether an individual or corporation and whether or not in the course of his trade of business, shall be liable to VAT imposed in Section 101 of the Code. Person refers to any individual, trust, estate, partnership, corporation, joint venture, cooperative or association. Taxable person refers to any person liable for the payment of value-added tax, whether or not registered in accordance with Section 107. SECTION [4.99-2] 4.105-2 VALUE-ADDED TAX: NATURE AND CHARACTERISTICS (reordered)
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 (VAT) imposed in Sections 106 to 108 of this Code.
The value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. This rule shall likewise apply to existing contracts of sale or lease of goods, properties or services at the time of the effectivity of Republic Act No. 7716.
VAT is an indirect tax and the amount of the tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. These rules shall likewise apply to existing contracts of sale or lease of goods, properties or services at the time of the effectivity of the R.A. 7716. SECTION [4.99-1] 4.105-1-1PERSONS LIABLE ( cont)
The phrase in the course of trade or business 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 nonstock, nonprofit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity.
In the course of trade or business means the regular conduct or pursuit of a commercial or economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a non-stock, non-profit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity. However, any business or businesses pursued by an individual where the aggregate gross sales or receipts do not exceed P100,000.00 during any 12month period shall be considered principally for subsistence or livelihood and not in the course of trade or business.1
SECTION 4.112-2 TRANSACTIONS EXEMPT FROM VAT AND FROM PERCENTAGE TAX: Any individual engaged in business or businesses where the aggregate gross sales or receipts do not exceed P100,000.00 during any 12-month period shall be exempt from the payment of VAT and from any percentage tax imposed under the NIRC.
These shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to ten percent (10%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor.
Re-ordered text follows: (1) The term goods or properties shall mean all tangible and intangible objects which are capable of pecuniary estimation and shall include: (a) Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business; 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; The right or the privilege to use in the Philippines of any industrial, commercial or scientific equipment; The right or the privilege to use motion picture films, films, tapes and discs; and Radio, television, satellite transmission and cable television time. Goods or properties refer to all tangible and intangible object which are capable of pecuniary estimation and shall include: 1. Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business; 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; The right or the privilege to use in the Philippines any industrial commercial or scientific equipment; The right or the privilege to use motion picture films, film tapes and discs; and Radio, television, satellite transmission and cable television time.
2.
(b)
3.
(c)
4. 5.
(d)
(e)
Sale of real properties held primarily for sale to customers or held for lease in the ordinarily course of trade or business of the seller shall be subject to VAT. In the case of sale of real properties on the installment plan, the real estate dealer shall be subject to VAT on the installment payments, including interest and penalties, actually and/or constructively received on or after January 1, 1996. Sale of real property on the installment plan means sale of real property by a real estate dealer, the initial payments of which in the year of sale do not exceed twenty-five percent (25%) of the gross price. However, in the case of sale of real properties on the deferred-payment basis, not on the installment plan before January 1, 1996, the subsequent payments of the balance of the gross selling price on or after
Note section 4.107-1(d) Application for effective zero-rating: Except for actual export sale, other cases of zero-rated sales in Sec. 4.100-3 and Sec. 4.102-2 (c) shall require prior application with the Revenue District Office for effective zero-rating. Without an approved application for effective zero-rating, the transaction otherwise entitled to zero-rating shall be considered exempt.
(3)
(3)
(4) (5)
SECTION 4.106-2 EFFECTIVELY ZERORATED SALE OF GOODS AND PROPERTIES Effectively zero-rated sales of goods and properties shall refer to the sale by a VAT-registered person to a person or entity who was granted indirect tax exemption under special laws, e.g. RA 7227 or international agreements, e.g. ADB, IRRI. Under these Regulations, effectively zero-rated transactions shall cover local sale of goods and properties to persons or entities who enjoy exemptions from indirect taxes under par. (a) no (3), pars, (b) and (c) of the preceding section. (B) (1) Transactions Deemed Sale Transfer, use or consumption not in the course of trade or business of goods or properties originally intended for sale or for use in the course of business; Distribution or transfer to: (a) Shareholders or investors as share in the profits of the VAT-registered persons; or Creditors in payment of debt; (B) SECTION [4.100-4] 4.106-4 TRANSACTIONS DEEMED SALE (a) The following transactions shall be deemed sale pursuant to Section [100] 106 (b) of the Code: (A) 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 the VAT-registered person withdraws goods from his business for his personal use; Distribution or transfer to: (1) Shareholders or investors are share in the profits of the VAT-registered person; Property dividends which constitute stocks in trade or properties primarily held for sale or lease declared out of retained earnings on or after January 1, 1996 and distributed by the company to its
(2)
(b) (3)
Consignment of goods if actual sale is not made within sixty (60) days following the date such goods were consigned; and Retirement from or cessation of business, with respect to inventories of taxable goods existing as of such retirement or cessation.
(4)
Consignment of goods if actual sale is not made within 60 days following the date such goods were consigned. Consigned goods returned by the consignee within the 60-day period is not deemed sold; Retirement from or cessation of business with respect to all goods on hand, whether capital goods, stock-intrade, 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 for purposes of this Section; (i) (ii) Change of ownership of the business; and Dissolution of a partnership other than a general professional partnership and creation of a new partnership which takes over the business.
(D)
SECTION [4.100-5] 4.106-5 CHANGES IN OR CESSATION OF STATUS AS A VATREGISTERED PERSON (re-ordered) (C) Changes in or Cessation of Status of a VAT-registered Person (a) Subject to tax
The tax imposed in Subsection (A) of this Section shall also apply to goods disposed of or existing as of a certain date if under circumstances to be prescribed in rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner, the status of a person as a VAT-registered person changes or is terminated.
The value-added tax provided for in Sections [100] 106 and [102] 108 of the Code shall apply to services, goods, or properties originally intended for sale or for use in business and capital goods which are existing as of the occurrence of the following: (1) Change of business activity from valueadded status to exempt status. An example is a VAT-registered person engaged in a taxable activity like wholesaler or retailer who decides to discontinue such activity and engages instead in life insurance business or in any other business not subject to VAT; Approval of a request for cancellation of registration due to reversion to exempt status.
(2)
(4)
(b)
The VAT shall not apply to goods or properties existing as of the occurrences of the following: (1) Change of control of a corporation by the acquisition of the controlling interest of such corporation by another stockholder or group of stockholder, Example: transfer of property to a corporation in exchange for its shares of stock under Section [34] 40 (c)(2)and(6)(c) of the Code. Change in the trade or corporate name of the business; Merger or consolidation of corporations. The unused input tax of the dissolved corporation as of the date of merger or consolidated shall be absorbed by the surviving or new corporation.
(2) (3)
SECTION [4.100-6] 4.106-6 COMPUTATION OF OUTPUT TAX (re-ordered) (D) (1) Determination of the Tax The tax shall be computed by multiplying the total amount indicated in the invoice by oneeleventh (1/11). Sales Returns, Discounts Allowances and Sales The output tax on the sale of goods or properties during the month or quarter shall be computed by multiplying the total amount indicated in the invoice by 1/11. In taxable sales of real property where the zonal value/market value applies, output tax shall be computed by multiplying the zonal value or market
(2)
(b)
The output tax equivalent to 10% based on the market value of the goods deemed sold shall be imposed as of the occurrence of the transactions enumerated in Section 4.[100]106-4 (A), (B) and (C) of these Regulations. However, in the case of retirement from or cessation of business under Section 4.[100]106-4(D) of these Regulations, the tax base shall be the acquisition cost or the current market price of the goods, whichever is lower. (c)
3
Note Regulation 8-99 (26 April 1999): SECTION 1. Scope. All VAT-registered taxpayers who are required under Section 237 of the 1997 Tax Code to issue receipts or sales or commercial invoices are no longer allowed to separately bill the value-added tax corresponding thereto. The amount appearing in the sales invoices/receipts is thus deemed inclusive of the value-added tax due thereon. SECTION 2. Penalty. Failure or refusal to comply with the requirement in Section 1 hereof shall, upon conviction, for each act or mission, be punished by a fine of not less than One thousand pesos (P1,000) but not more than Fifty thousand pesos (P50,000) and suffer imprisonment of not less than two (2) years but not more than four (4) years. SECTION 3. Repealing Clause. All existing rules and regulations or parts thereof which are inconsistent with the provisions of this regulation are hereby revoked. SECTION 4. Effectivity This Regulation shall take effect fifteen (15) days after publication in any newspaper of general circulation.
There shall be levied, assessed and collected on every importation of goods a value-added tax equivalent to ten percent (10%) based on the total value used by the Bureau of Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any, and other charges, such tax to be paid by the importer prior to the release of such goods from customs custody: Provided, That where the customs duties are determined on the basis of the quantity or volume of the goods, the value-added tax shall be based on the landed cost plus excise taxes, if any.
(B)
(b)
In the case of tax-free importation of goods into the Philippines by persons, entities or agencies exempt from tax where such goods are subsequently sold, transferred or exchanged in the Philippines to nonexempt 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. The 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.
The rates prescribed under Section [101] 107 (a) shall be applicable to all importations withdrawn from custom custody. The value-added tax or importation shall be paid by the importer prior to the release of such goods from customs custody. Importer refers to any person who brings goods into the Philippines, whether or not made in the course of his trade or business. It includes nonexempt persons or entities who acquire tax-free imported goods from exempt persons, entities or agencies. (c) Sale, transfer or exchange of imported goods by tax-exempt persons
In the case of goods imported into the Philippines by VAT-exempt persons, entities or agencies which are subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the latter shall be considered the importers thereof who shall be liable for VAT on such importation.
persons engaged in milling, processing, manufacturing or repacking goods for others; Proprietors, operators, or keepers of hotels, motels, resthouses, pension houses, inns, resorts; proprietors or operators of restaurants, refreshment parlors, cafes and other eating places, including clubs and caterers; dealers in securities; lending investors; transportation contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for hire; other domestic common carriers by land, air and water relative to their transport of goods or cargoes; franchise grantees of 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 does not exceed Ten
(7)
(8)
(12)
(13)
(15)
(16)
The phrase sale or exchange of services shall likewise include: (1) The lease or the 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; The lease or the use of, or the right to use of any industrial, commercial or scientific equipment; The supply of scientific, technical, industrial or commercial knowledge or information; 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 as is mentioned in subparagraph (2) or any such knowledge or information as is mentioned in subparagraph (3); 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 nonresident person; 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; The lease of motion picture films, films, tapes and discs; and The lease or the use of or the right to use radio, television, satellite transmission and
The phrase sale or exchange of services shall likewise include: (1) The lease or the use of or the right privilege to use any copyright, patent, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right. The lease or the use of, or the right to use any industrial, commercial or scientific equipment. The supply of scientific, technical industrial or commercial knowledge or information; 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 as is mentioned in subparagraph (2) hereof or any such knowledge or information as is mentioned in subparagraph (3) hereof; or The supply of services by a nonresident person or his/its employee in connection with the use of property or rights belongings to, or the installation or operation of any brand, machinery or other apparatus purchased from such nonresident person; 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
(2)
(2)
(3) (4)
(3)
(4)
(5)
(5)
(6)
(6)
(7) (8)
Real estate lessor includes any person engaged in the business of leasing or subleasing real property. Lease of property shall be subject to VAT regardless of the place where the contract of lease or licensing agreement was executed if the property leased or used is in the Philippines. The VAT on rental and/or royalties payable to non-resident foreign corporations or owners for the sale of services and use or lease of properties in the Philippines shall be based on the contract price agreed upon by the licensor and the licensee. The licensee shall be responsible for the payment of VAT on such rentals and/or royalties in behalf of the non-resident foreign corporation or owner by filing a separate VAT declaration/return for this purpose. They duly validated VAT declaration/return is sufficient evidence in claiming input tax credit by the licensee. Non-resident lessor/owner refers to any person, natural or juridical, an alien, or a citizen who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad with a definite intention to reside therein, and who owns/leases properties, real or personal, whether tangible or intangible, located in the Philippines. (c) In a lease contract, the advance payment by the lessee may be: (i) (ii) (iii) a loan to the lessor from the lessee, or an option money for the property, or a security deposit to insure the faithful performance of certain obligations of the lessee to the lessor, or pre-paid rental.
(iv)
If the advance payment is actually a loan to the lessor, or an option money for the property, or a security deposit for the faithful performance of certain obligations of the lessee, such advance payment is not subject to VAT.
(2)
(3)
(e)
Dealers in securities and lending investors shall be subject to VAT on the basis of the gross income they derive, respectively, from their sale or exchange of securities or their lending activities. Dealer in securities means a merchant of stock or securities, whether an individual partnership or corporation, with an established place of business, regularly engaged in the purchase of securities and their resale to customers, that is, one who as a merchant buys securities and sells them to customers with a view to the gains and profits that may be derived therefrom. Lending investor include all persons other than banks, non-bank financial intermediaries, finance companies and other financial intermediaries not performing quasi-banking functions who make a practice of lending money for themselves or others at interest. In the case of pre-need companies, they shall be considered as dealers in securities and their gross receipts shall mean actual receipts on contract price minus contributions to the trust funds to be set up independently as mandated by the Securities and Exchange Commission.
(f)
Services of franchise grantees of telephone and telegraph, radio and/or television broadcasting and all other franchise grantees, except electric, gas and water utilities, shall be subject to VAT. However, franchise grantees of radio and/or television broadcasting whose annual gross receipts of the preceding year does not exceed Ten Million Pesos (P10,000,000.00) shall not be
(h)
SECTION [4.102-2] 4.108-2 ZERO-RATING (a) In general A zero-rated sale by a VAT registered person, which is a taxable transaction for VAT purposes, shall not result in any output tax. However, the input tax on his purchases of goods, properties or services related to such zero-rated sale shall be available as tax credit or refund in accordance with these regulations. 5 (b) Transactions Subject to Zero Percent (0%) Rate
The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: (1) 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); Services other than those mentioned in the preceding paragraph, 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); 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;
(2)
The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: (1) 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); Services other than processing, manufacturing or repacking for other persons doing business outside the Philippines of
(3)
(2)
Note section 4.107-1(d) Application for effective zero-rating: Except for actual export sale, other cases of zero-rated sales in Sec. 4.100-3 and Sec. 4.102-2 (c) shall require prior application with the Revenue District Office for effective zero-rating. Without an approved application for effective zero-rating, the transaction otherwise entitled to zero-rating shall be considered exempt.
(4) (5)
(c)
Effectively zero-rated sales of services shall refer to the sale by a VAT-registered person to a person or entity who was granted indirect tax exemption under special laws, or international agreements. Under these Regulations, effectively zero-rated transactions shall be limited to the local sale of services to persons or entities who enjoy exemptions form indirect taxes under subparagraph (b) Nos. (3) (4) and (5) of this section. (C) Determination of the Tax
The tax shall be computed by multiplying the total amount indicated in the official receipt by oneeleventh (1/11). SECTION 109 EXEMPT TRANSACTIONS SECTION [4.103-1] 4.109-1 EXEMPTIONS (A) In general An exemptions means that the sale of goods or properties and/or services and the use or lease of properties is not subject to VAT (output tax) and the seller is not allowed any tax credit on VAT (input tax) previously paid. The person making the exempt sale of good, properties or services shall not bill any output tax to his customers because the said transaction is not subject to VAT. On the other hand, a VATregistered purchaser of VAT-exempt
(b)
(f)
(f)
(g)
(g)
(h)
(h)
(i)
(i)
(2)
(3)
(4)
(5)
(7)
(8)
(9)
(k)
Services by agricultural contract growers and milling for others of palay into rice, corn into grits and sugar cane into raw sugar;
(k)
Services by agricultural contract growers and milling for others of palay into rice, corn into grits, and sugar cane into raw sugar; Agricultural contract growers refer to those persons producing for others poultry, livestock or other agricultural and marine food products in their original state. The term agricultural contract growers shall also include reforestation contractors pursuant to the Government Reforestation Program.
(l)
Medical, dental, hospital and veterinary services subject to the provisions of Section 17 of Republic Act No. 7716, as amended;
(l)
Medical, dental, hospital and veterinary services, subject to the provisions of Section 15 of these Regulations.i Laboratory services are also exempted. If the hospital or clinic operates a pharmacy or drug store, the sale of drugs and medicine is subject to VAT.
(m)
Educational services rendered by private educational institutions, duly accredited by the Department of Education, Culture and Sports (DECS) and the Commission on Higher Education (CHED), and those rendered by government educational institutions;
(m)
Educational services rendered by private educational institutions duly accredited by me Department of Education, Culture and Sports (DECS) and/or the Commission on Higher Education (CHED) and those rendered by government educational institutions; Educational services shall refer to academic, technical or vocational education provided by private educational institutions duly accredited by the DECS and/or the
(o) (p)
Services rendered by individuals pursuant to an employer-employee relationship; 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; Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws, except those under Presidential Decree Nos. 66, 529 and 1590;
(o) (p)
(q)
(q)
(3)
(r)
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; Sales by electric cooperatives duly registered with the Cooperative Development Authority or National Electrification Administration,
(r)
Sales by agricultural cooperatives duly registered with the Cooperative Development Authority (CDA) to their members, as well as sale of their produce, whether in its original state or processed form, to nonmembers; 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; Sales by electric cooperatives duly registered with the CDA or National Electrification Administration (NEA), relative to the
(s)
(s)
(u)
(u)
(v) (w)
Export sales by persons who are not VATregistered; Sale 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 utilized for low-cost and socialized housing as defined by Republic Act No. 7279, otherwise known as the Urban Development and Housing Act of 1992, and other related laws, house and lot and other residential dwellings valued at One million pesos (P1,000,000) and below: Provided, That not later than January 31st of the calendar year subsequent to the effectivity of this Act and each calendar year thereafter, the amount of One million pesos (P1,000,000) shall be adjusted to its present value using the Consumer Price Index, as published by the National Statistics Office (NSO);
(v) (w)
Export sales by persons who are not VATregistered; The following sales of real properties are exempt from VAT, namely: (1) Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business: Sale of real properties utilized for low-cost housing under BP Blg. 220, PD No. 957 or RA No. 7279, otherwise known as the Urban and Development Housing Act of 1992 and other related laws, wherein the price ceiling per unit is P375,000.00, or as may from time to time be determined by the House and Land Use Regulatory Board (HLURB) and other related laws; Low-cost housing refers to housing projects intended for home-less lowincome 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 and Urban
(2)
(x)
(x)
(y)
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; and 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 Five hundred fifty thousand pesos (P550,000): Provided, That not later than January 31st of the calendar year subsequent to the effectivity of Republic Act No. 8241 and each calendar year thereafter, the amount of Five hundred fifty thousand pesos
(y)
Sale, importation, printing or publication of books and any newspaper including periodical), 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; 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 does not exceed the amount of P550,000.00: Provided That not later than January 31, 1988 and each calendar year thereafter, amount of P550,000.00 shall be adjusted to its present value using the Consumer Price Index, as published by the
(z)
(z)
The foregoing exemptions to the contrary notwithstanding, any person, whose sale of goods, properties or services which are otherwise not subject to VAT, but who issues a VAT invoice or receipt therefor, shall, in addition to his liability to other applicable percentage tax, if any, be liable to the tax imposed in Sec. [100] 106 or [102] 108 without the benefit of input tax credit, and such tax shall [not] also be recognized as input tax credit to the purchaser under Section [104] 110, all of the Code.
(b)
3. 4. 5.
(2)
The input tax on domestic purchase of goods or properties shall be creditable. (a) To the purchaser upon consummation of sale and on importation of goods or properties; and To the importer upon payment of the value-added tax prior to the release of the goods from the custody of the Bureau of Customs.
(b)
However, 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. (3) A VAT-registered person who is also engaged in transactions not subject to the value-added tax shall be allowed tax credit as follows: (a) Total input tax which can be directly attributed to transactions subject to value-added tax; and
Taxpayers who became VAT-registered persons upon exceeding the minimum turnover of P550,000.00, or who voluntarily register even if their turnover does not exceed P550,000.00 (except franchise grantees of radio and television broadcasting whose threshold is P10,000,000.00) shall be entitled to a transitional input tax on the inventory on hand as of the effectivity of their VAT registration, on the following: (1) (2) goods purchased for resale in their present condition; materials purchased for further processing, but which have not yet undergone processing; goods which have been manufactured by the taxpayer; goods in process and supplies, all of which are for sale or for use in the course of the taxpayers trade or business as a VATregistered person.
(3) (4)
The transitional input tax shall be eight percent (8%) of the value of the beginning inventory or actual VAT paid on such, goods, materials and supplies, whichever is higher, which amount may be allowed as tax credit against the output tax of the VATregistered person. The value allowed for income tax purposes on inventories shall be the basis for the computation of the 8% transitional input tax, excluding goods that are exempt from VAT under Section [103] 109 of the Code. The threshold amount of P550,000.00 applies only for the calendar year 1997. However, not later than the 31st day of January of each calendar year thereafter, the said amount shall be adjusted to its present value using the Consumer Price Index as published by the NSO. (B) (1) Presumptive Input Tax Credits Persons or firms engaged in the processing of sardines, mackerel and milk, and in manufacturing refined sugar and cooking oil, shall be allowed a presumptive input tax, creditable against the output tax, equivalent to one and one-half percent (1%) of the gross value in money of their purchases of (b) (1) Presumptive Input Tax Credits Persons or firms engaged in the processing of sardines, mackerel, and milk, and in manufacturing refined sugar and cooking oil, shall be allowed a presumptive input tax, creditable against the output tax, equivalent to one and one half percent (1.5%) of the gross value in money of their purchases of
Only VAT-registered persons shall be entitled to the transitional and presumptive input tax credits.
Any VAT-registered person, whose sales are zerorated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1),(2) and (B) and Section 108 (B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, 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. (B) Capital Goods A VAT-registered person may apply for the issuance of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased, to the extent that such input taxes have not been applied against output taxes. The application may be made only within two (2) years after the close of the taxable quarter when the importation or purchase was made. (C) Cancellation of VAT Registration 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 this Code 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. (D) Period within which Refund or Tax Credit of Input Taxes shall be Made
Only a VAT-registered person may be given a tax credit certificate or refund of VAT paid corresponding to the zero-rated sales of goods, properties or services, excluding the presumptive input tax and to the extent that such input tax has not been applied against the output tax. The application should be made within two (2) years after the close of the taxable quarter when the sales were made. However, where the taxpayer is engaged in both zero-rated or effectively zero-rated sales and in taxable or exempt sales of goods, properties or services, and where the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transaction, only the proportionate share of input taxes allocated to zerorated or effectivity zero-rated sales can be refunded or issued a tax credit certificate. (b) Capital Goods Only a VAT-registered person may apply for issuance of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased. The refund shall be allowed to the extent that such input taxes have not been applied against output taxes. The application should be made within two (2) years after the close of the taxable quarter when the importation or purchase was made. Refund of input taxes on capital goods shall be allowed only to the extent that such capital goods are used in VAT taxable business. If it is also used in exempt operations; the input tax refundable shall only be ratable portion corresponding to the taxable operations. Capital goods or properties refer to goods or properties with estimated useful life greater than one year and which are treated as depreciable assets under Section [29 (f)] 34(F), used directly or indirectly in the production or sale of taxable goods or services. (c) Land Only a VAT-registered person may apply for issuance of a tax credit certificate or refund of input taxes on land purchased to the extent that such input tax has not been applied to output tax. The application should be made within two (2) years after the close of the taxable quarter when the purchase was made. Refund of input taxes on land shall be allowed only
In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty
All VAT-registered persons shall, for every sale or lease of goods or properties or services, issue duly registered receipts or sales or commercial invoices which must show: 1. 2. 3. 4. the name, TIN and address of seller; date of transaction; quantity, unit cost and description of merchandise or nature of service; the name, TIN, business style, if any, and address of the VAT-registered purchaser, customer or client; the word zero rated imprinted on the invoice covering zero-rated sales; and the invoice value or consideration.
(2)
5. 6.
In the case of sale of real property subject to VAT and where the zonal or market value is higher than the actual consideration, the VAT shall be separately indicated in the invoice or receipt. Only VAT-registered persons are required to print their TIN followed by the word VAT in their invoice or receipts and this shall be considered as a VAT Invoice. All purchases covered by invoices other than VAT Invoice shall not give rise to any input tax. If the taxable person is also engaged in exempt operations, he should issue separate invoices or receipts for the taxable and exempt operations. A VAT Invoice shall be issued only for sales of goods, properties or services subject to VAT imposed in Sections 100 and 102 of the Code. The invoice or receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records. SECTION [4.108-2] 4.113-2 INVOICING AND RECORDING DEEMED SALE TRANSACTIONS In the case of Section 4.[100] 106-a (A) of these Regulations, a memorandum entry in the subsidiary sales journal to record withdrawal of goods for personal use is required. In the case of Section 4. [100]106-4(B) and (C) of these Regulations, an
Notwithstanding the provisions of Section 233, all persons subject to the value-added tax under Sections 106 and 108 shall, in addition to the regular accounting records required, maintain a subsidiary sales journal and subsidiary purchase journal on which the daily sales and purchases are recorded. The subsidiary journals shall contain such information as may be required by the Secretary of Finance.
Every person liable to pay VAT shall file a quarterly return of the amount of his gross sales or receipts within twenty (20) days following the close of taxable quarter using the latest version (April 2002 (ENCS version of Quarterly VAT Return (BIR Form 2550Q-April 2002 (ENCS) hereto attached as Annex A. The term taxable quarter shall mean the quarter that is synchronized to the income tax quarter of the taxpayer (i.e., the calendar or fiscal quarter). Amounts reflected in the monthly VAT declarations for the first two (2) months of the quarter shall still be included in the quarterly VAT return which reflects the cumulative figures for the taxable quarter. Payments in the monthly VAT declarations shall, however, be credited in the quarterly VAT return to arrive at the net VAT payable or excess input tax/over-payment as of the end of a quarter. "Example. Suppose the accounting period adopted by the taxpayer is fiscal year ending October 2003, the taxpayer has to file monthly VAT declarations for the months of November 2002, December 2002, and for the months February, March, May, June, August, and September for Year 2003, on or before the 20th day of the month following the close of the taxable month. His quarterly VAT returns corresponding to the quarters ending January, April, July, and October 2003 shall, on the other hand, be filed and taxes due thereon be paid, after crediting payments reflected in the Monthly VAT declarations, on or before February 25, May 25, August 25, and November 25, 2003, respectively. The monthly VAT Declarations (BIR Form 2550M) of taxpayers whether large or non-large shall be filed and the taxes paid not later than the 20 th day following the end of each month. (as amended by RR 4-2002 and 8-2002). (B) Payment of VAT All persons liable to VAT whether large or nonlarge shall pay the tax monthly based on the taxable sales/receipts for the month, using the monthly VAT declaration form within [twenty five (25)] twenty (20) days after the end of [the] each month; provided, however, that with respect to taxpayers enrolled with the electronic filing and payment system (EFPS), the deadline for electronically filing the monthly VAT declaration and paying the tax due thereon shall be five (5) days later than the deadline set in RR 4-2002. The declaration shall be
The Government or any of its political subdivisions, instrumentalities or agencies, including governmentowned or controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods from sellers and services rendered by contractors which are subject to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold the value-added tax due at the rate of three percent (3%) of the gross payment for the purchase of goods and six percent (6%) on gross receipts for services rendered by contractors on every sale or installment payment which shall be creditable against the value-added tax liability of the seller or contractor: Provided, however, That in the case of government public works contractors, the withholding rate shall be eight and one-half percent (8.5%): Provided, further, That the payment for lease or use of properties or property rights to nonresident owners shall be subject to ten percent (10%) withholding tax at the time of payment. For this purpose, the payor or person in control of the payment shall be considered as the withholding agent. The value-added tax withheld under this Section shall be remitted within ten (10) days following the end of the month the withholding was made.
RR 4-2002 provided that: The VAT (and percentage) withholding agents, whether large or non-large taxpayers, government or private, shall accomplish the Monthly Remittance Return of VAT (and other percentage taxes withheld whether for the withholding of VAT (or percentage tax) by large and non-large taxpayers, shall be filed and payments made within ten (10) days following the end of the month withholding wasmade; which deadline shall be extended for an additional five (5) for taxpayers who are availing of the Electronic Filing Payment and Payment System (EFPS) of the BIR from the time that the return is made available in the System (EFPS). Thus in the remittance of VAT withheld, whether creditable or final, the type of form to be used by the withholding agent is BIR FORM No. 1600 and
(6 RR 4-2002). For purposes of claiming or applying the creditable taxes withheld against the taxes due on the returns to be filed by the payee, the payee shall attach a copy of the Certificate of Creditable Tax Withheld at Source (BIR Form 2307) issued by the
SECTION 4.110-4
SUBMISSION OF THE
Section 115 Power of the Commissioner to suspend the business operations of a taxpayer
1997 National Internal Revenue Code
SECTION 115 POWER OF THE COMMISSIONER TO SUSPEND THE BUSINESS OPERATIONS OF A TAXPAYER The Commissioner or his authorized representative is hereby empowered to suspend the business operations and temporarily close the business establishment of any person for any of the following violations: (a) In the Case of a VAT-registered Person. (1) (2) (3) Failure to issue receipts or invoices; Failure to file a value-added tax return as required under Section 114; or Understatement of taxable sales or receipts by thirty percent (30%) or more of his correct taxable sales or receipts for the taxable quarter.
(3)
(b)
(4) (b)
The temporary closure of the establishment shall be for the duration of not less than five (5) days and shall be lifted only upon compliance with whatever requirements prescribed by the Commissioner in the closure order.
The interest on unpaid amount of tax, civil penalties and criminal penalties imposed in Title XI of the Tax Code shall also apply to violations of the provisions of Title IV of the Code.
SECTION 15. Effectivity of the Imposition of VAT on Certain Goods, Properties and Services. The value-added tax shall be levied, assessed and collected on the following transactions starting JANUARY 1, 1998: (a) Services performed in the exercise of profession or calling subject to the professional tax under the Local Government Code or RA No. 7160, and professional services performed by registered general professional partnerships; actors, actresses, talents, singers and emcees; radio and television broadcasters, choreographers; musical, radio, movie, television and stage directors; and professional athletes; (b) Services rendered by banks, non-bank financial intermediaries, finance companies and other financial intermediaries not performing quasi-banking functions; and (c) The lease or use of sports facilities and equipment by amateur players, as provided under RA No. 6847, except sports facilities and equipment which are exclusively or mainly for the private use of shareholders or members of the club or organization which owns or operates such sports facilities and equipment. Prior to their inclusion in the coverage of the value-added tax, the above services shall continue to pay the applicable tax prescribed under the present provision of the Code. However, when public interest so requires, the Congress of the Republic of the Philippines, taking into account the impact on prices of goods and services, may exclude any of the above services from the coverage of the value-added tax: Provided, however; That in the event of the exclusion of any of the above services the existing applicable tax under the provisions of the Code shall continue to be paid on the service so excluded. The imposition of the value added tax on previously exempted services has become effective after January 1, 2003 in the absence of later legislation and in accordance with Republic Act 9010 AN ACT TO FURTHER DEFER THE IMPOSITION OF THE VALUE ADDED TAX ON CERTAIN SERVICES, AMENDING FOR THE PURPOSE OF SECTION 5 OF REPUBLIC ACT NO. 8424, AS AMENDED BY REPUBLIC ACT 8761. These services are: a) Services performed in the exercise of a profession or calling subject to professional tax as provided in Republic Act No. 7160, otherwise known as the Local Government Code of 1991, and professional services performed by registered general professional partnerships; actors, actresses, talents, singers, and emcees,; radio and television broadcasters, choreographers, musical directors, movie, television and stage directors, and professional athletes;
b) Services rendered by bank, non-bank financial internmediaries, finance companies and other financial intermediaries not performing quasi banking functions; and c) Services rendered by stock, real estate, commercial customs and immigration brokers who will be subject to a value added tax in lieu of 8% tax of their gross receipts.
The transitory provisions contained in Revenue Regulation 1-2003 provide that the afftected taxpayers should register as VAT taxpayer by January 31,2003 without penalty. In addition, NON-VAT registered taxpayers who change their status are required to submit an inventory of unused receipts. Unused receipts may continue to be used provided they are stamped VAT registered as of ________is stamped on all copies thereof. Billed but uncollected services- Amounts due on sales of services rendered on or before December 31, 2002 and becoming liable to VAT starting January 1, 2003 payments due on or before after such date shall be considered as accrued as of December 31,2002, for purposes of VAT exemption and payment of the applicable percentage tax subject to the following conditions: 1) An information return shall be filed showing the name of the contractee /s, customer/s, client/s and amount of the contract price outstanding as of December 31, 2003 and containing a declaration to pay percentage tax due if any; 2) The seller billed the unpaid amount not later than December 31, 2002 and a copy of such builling is attached to the information return in section (1) hereof; 3) The seller has recorded in its books of account for 2002 the amount receivable; 4) The seller issued or should issue a non-VAT invoice to buyer for this purpose; 5) He seller files not later than January 20, 2003or on or before the 20 th day of the next month, depending on the month of the collection of the consideration, the regular percentage tax return for the payment of the percentage tax payments received after 2002 (applicable to brokers only).
Failure to comply with the above conditions shall automatically subject gross receipts to value added tax. (Revenue Regulation 1-2003)
ii
See also Revenue Regulations No. 2-98: SECTION 4.114. Withholding of Creditable Value-Added Tax In general, value-added tax due on sales of goods and services are not subject to withholding since the tax is not determinable at the time of sale. However, sale of goods and services to the government subject to VAT shall be subject to withholding pursuant to Sec. 114 (C) of RA 8424. (A) Rates and basis of creditable value-added tax to be withheld. The gross payments made by the government to sellers of goods and services shall be subject to withholding tax at the rates herein prescribed: (1) In general, payments by the government or any of its political subdivisions, instrumentalities or agencies including government-owned or controlled corporations (GOCCs) on account of its purchase of goods from sellers and services rendered by contractors who are subject to the value-added tax On gross payment for the purchase of goods 3% On gross payment for services rendered 6% (2) Payments made to government public works contractors 8.5% (3) Payments for lease or use of property or property rights to non-resident owners 10% (B) Persons required to deduct and withhold. All local government units, represented by the Provincial Treasurer in provinces, the City Treasurer in cities, the Municipal Treasurer in municipalities, and Barangay Treasurer in barangays, Treasurers of GOCCs and the Chief Accountant or any person holding similar position and performing similar function in national government offices, as withholding agents, shall deduct and withhold the prescribed creditable value-added tax before making any payment to seller of goods and services. Where the government as herein defined has regional offices, branches or units, the withholding and remittance of the creditable VAT may be done on a decentralized basis as such, the treasurer or the chief accountant or any person holding similar function in said regional office, branch or unit shall deduct and withhold the creditable VAT before making any payment to the seller of goods and services. (C) Returns and payment of taxes withheld. The withholding agents shall accomplish the Monthly Value-Added Tax Declaration (BIR Form 2550M) in duplicate and the amount withheld paid upon filing the return with the authorized agent banks located within the Revenue District Office (RDO) having jurisdiction over the place where the government office is located. In places where there are no authorized agent bank, the return shall be filed directly with the Revenue District Offices, Collection Offices or the duly authorized Treasurer of the city or municipality where the government office is located except in cases where the Commissioner otherwise permits. The required return shall be filed and payments made within ten (10) days following the end of the month the withholding was made except taxes withheld for the 3rd month of the quarter which shall be remitted through a Quarterly Value-Added Tax Return (BIR Form 2550Q) to be filed not later than the 25th day after the end of the calendar quarter. (D) Certificate of Value Added Tax Withheld. Every withholding agent shall furnish each seller of goods and services from whom taxes has been deducted and withheld, the Certificate of Creditable Tax Withheld at Source (BIR Form 2307) to be accomplished in quadruplicate, the first three copies of which shall be given to the seller/payee not later than the fifteenth day of the following month. The fourth copy shall be the file copy of the withholding agent. (E) Liability of designated officers. (1) Additions to the tax. The designated Treasurers, Chief Accountants and other persons holding similar positions, who have the duty to withhold and remit the value added tax in their respective offices shall be personally liable for the additions to the tax prescribed in Sec. 247 of the Code. (2) Punishable acts or omissions. Every officer or employee of the government of the Republic to the Philippines or any of its agencies and instrumentalities, its political subdivisions, as well as government owned or controlled corporations charged with the duty to deduct and withhold any internal revenue tax and to remit the same in accordance with these regulations shall, upon conviction for each act or omission herein-below specified, be fined in a sum of not less than five thousand pesos (P5,000.00) but
not more than fifty thousand pesos (P50,000.00) or imprisoned for a term of not less than six months and one day but not more than two years, or both. (a) Fails or causes the failure to deduct and withhold any internal revenue tax covered by these regulations; (b) Fails or causes the failure to remit the taxes deducted and withheld within the time prescribed therein; (c) Fails or causes the failure to file the return or issue certificate required. REPEALING CLAUSE. All existing rules and regulations or parts thereof which are inconsistent with the provisions of these regulations are hereby revoked. EFFECTIVITY. These regulations shall take effect on compensation income paid beginning January 1, 1998. No penalties shall apply until May 15, 1998 for non-compliance with the new features of the Code as implemented in these regulations.
iii
Section 4.110-4 inserted by section 1 of Revenue Regulations No. 13-97, dated 18 November 1997. Section 2 of those regulations, with related only to section 4.110-4 as inserted, reads: Penalty Provision. A person violating any provision of these Regulations [Revenue Regulation No. 13-97] shall upon conviction FOR EACH ACT OR OMISSION be fined in a sum of not more than One thousand pesos (P1,000), or imprisonment for a term of not more than six (6) months, or BOTH. Thus, failure to submit the name of each buyer or seller/supplier of goods and services would constitute a single act or omission punishable by law. However, payment of the said penalty and/or imprisonment upon conviction as provided for by law shall not relieve the subject taxpayer from submitting the aforesaid names of buyers and sellers of goods and services to be contained in Summary Lists of Sales and Purchases, which shall be considered as a single act or omission by itself.