TRAIN LAW
Sec. 108 - VAT on Tax on Sale of Services
and Use or Lease of Properties
OLD (NIRC)
(A) Rate and Base of Tax. - There shall
be levied, assessed and collected, a value-
added tax equivalent to ten percent
(10%) 10 of gross receipts derived from the
sale or exchange of services, including the
use or lease of properties: Provided, That
the President, upon the recommendation of
the Secretary of Finance, shall, effective
January 1, 2006, raise the value-added tax
to twelve percent (12%), after any of the
following conditions has been satisfied:
(i) Value-added tax collection as a
percentage of Gross Domestic Product
(GDP) of the previous year exceeds two
and four-fifth percent (2 4/5%); or
(ii) National government deficit as a
percentage of GDP of the previous year
exceeds one and one-half percent (1 1/2%).
The phrase "sale or exchange of services"
means the performance of all kinds of
services in the Philippines for others for a
fee, remuneration or consideration,
including those performed or rendered by
construction and service contractors; stock,
real estate, commercial, customs and
immigration brokers; lessors of property,
whether personal or real; warehousing
services; lessors or distributors of
cinematographic films; persons engaged in
NEW What was changed?
(A) Rate and Base of Tax. - There shall
be levied, assessed and collected, a value-
added tax equivalent to twelve percent
(12%) of gross receipts derived from the
sale or exchange of services, including the
use or lease of properties.
The phrase "sale or exchange of services"
means the performance of all kinds of
services in the Philippines for others for a
fee, remuneration or consideration,
including those performed or rendered by
construction and service contractors; stock,
real estate, commercial, customs and
immigration brokers; lessors of property,
whether personal or real; warehousing
services; lessors or distributors of
cinematographic films; persons engaged in
milling processing, manufacturing or
repacking goods for others; proprietors,
operators or keepers of hotels, motels, rest
houses, 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 another domestic common carriers by
land relative to their transport of goods or
cargoes; common carriers by air and sea
 12% of the gross receipts would be the
general base under sale or exchange of
services including the use or lease of
properties without further provisions.
 Under transactions subject to Zero
Percent (0%) Rate (4), additional
provision was established which
provides that services rendered to
persons engaged in international
shipping or international air
transport operations, including
leases of property for use thereof
shall be exclusive for international
shipping or air transport operations.
 Those services rendered to registered
enterprises within a separate customs
territory as provided under special
law and registered enterprises
within tourism enterprise zones as
declared by the TIEZA subject to
the provisions under Republic Act
No. 9593 or the Tourism Act of
2009, that falls under
subparagraphs (B)(1) and (B)(5)
shall be subject to the twelve
percent (12%) value-added tax and
no longer be subject to the zero
percent (0%) VAT rate upon
satisfaction of the conditions
mentioned.
milling processing, manufacturing or
repacking goods for others; proprietors,
operators or keepers of hotels, motels, rest
houses, 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 another domestic common carriers by
land relative to their transport of goods or
cargoes; common carriers by air and sea
relative to their transport of passengers,
goods or cargoes from one place in the
Philippines to another place in the
Philippines; sales of electricity by
generation companies, transmission, and
distribution companies; services of
franchise grantees of electric utilities.
telephone and telegraph, radio and
television broadcasting and all other
franchise grantees except those under
section 119 of this Code, and non-life
insurance companies (except their crop
insurances), including surety, fidelity,
indemnity, and bonding companies; and
similar services regardless of whether or
not the performance thereof calls for the
exercise or use of the physical or mental
faculties. The phrase "sale or exchange of
relative to their transport of passengers,
goods or cargoes from one place in the
Philippines to another place in the
Philippines; sales of electricity by
generation companies, transmission, and
distribution companies, including electric
cooperatives; services of franchise
grantees of electric utilities, telephone and
telegraph, radio and television
broadcasting and all other franchise
grantees except those under section 119 of
this Code, and non-life insurance
companies (except their crop insurances),
including surety, fidelity, indemnity, and
bonding companies; and similar services
regardless of whether or not the
performance thereof calls for the exercise
or use of the physical or mental faculties.
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;
(2) The lease of the use of, or the right to
use of any industrial, commercial or
scientific equipment;
(3) The supply of scientific, technical,
industrial or commercial knowledge or
services" shall likewise include: information;

(1) The lease or the use of or the right or (4) The supply of any assistance that is
privilege to use any copyright, patent, ancillary and subsidiary to and is furnished
design or model, plan secret formula or as a means of enabling the application or
process, goodwill, trademark, trade brand enjoyment of any such property, or right as
or other like property or right; is mentioned in subparagraph (2) or any
such knowledge or information as is
(2) The lease of the use of, or the right to mentioned in subparagraph (3);
use of any industrial, commercial or
scientific equipment; (5) The supply of services by a nonresident
person or his employee in connection with
(3) The supply of scientific, technical, the use of property or rights belonging to,
industrial or commercial knowledge or or the installation or operation of any
information; brand, machinery or other apparatus
purchased from such nonresident person.
(4) The supply of any assistance that is
ancillary and subsidiary to and is furnished (6) The supply of technical advice,
as a means of enabling the application or assistance or services rendered in
enjoyment of any such property, or right as connection with technical management or
is mentioned in subparagraph (2) or any administration of any scientific, industrial
such knowledge or information as is or commercial undertaking, venture,
mentioned in subparagraph (3); project or scheme;

(5) 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.
(7) The lease of motion picture films,
films, tapes and discs; and
(8) The lease or the use of or the right to
use radio, television, satellite transmission
and cable television time.

(6) The supply of technical advice, Lease of properties shall be subject to the
assistance or services rendered in tax herein imposed irrespective of the
connection with technical management or place where the contract of lease or
administration of any scientific, industrial licensing agreement was executed if the
or commercial undertaking, venture, property is leased or used in the
project or scheme; Philippines.

(7) The lease of motion picture films, The term "gross receipts" means the total
films, tapes and discs; and amount of money or its equivalent
representing the contract price,
(8) The lease or the use of or the right to compensation, service fee, rental or
use radio, television, satellite transmission royalty, including the amount charged for
and cable television time. materials supplied with the services and
deposits and advanced payments actually
Lease of properties shall be subject to the or constructively received during the
tax herein imposed irrespective of the taxable quarter for the services performed
place where the contract of lease or or to be performed for another person,
licensing agreement was executed if the excluding value-added tax.
property is leased or used in the
Philippines. (B) Transactions Subject to Zero
Percent (0%) Rate - The following
The term "gross receipts" means the total services performed in the Philippines by
amount of money or its equivalent VAT- registered persons shall be subject
representing the contract price, to zero percent (0%) rate.
compensation, service fee, rental or
royalty, including the amount charged for (1) Processing, manufacturing or
materials supplied with the services and repacking goods for other persons doing
deposits and advanced payments actually business outside the Philippines which
or constructively received during the goods are subsequently exported, where
taxable quarter for the services performed the services are paid for in acceptable
or to be performed for another person, foreign currency and accounted for in
excluding value-added tax. accordance with the rules and regulations
of the Bangko Sentral ng Pilipinas (BSP);
(B) Transactions Subject to Zero
Percent (0%) Rate - The following (2) Services other than those mentioned in
services performed in the Philippines by the preceding paragraph, rendered to a
VAT- registered persons shall be subject person engaged in business conducted
to zero percent (0%) rate. outside the Philippines or to a nonresident
person not engaged in business who is
(1) Processing, manufacturing or outside the Philippines when the services
repacking goods for other persons doing are performed, the consideration for which
business outside the Philippines which is paid for in acceptable foreign currency
goods are subsequently exported, where and accounted for in accordance with the
the services are paid for in acceptable rules and regulations of the Bangko
foreign currency and accounted for in Sentral ng Pilipinas (BSP)
accordance with the rules and regulations
of the Bangko Sentral ng Pilipinas (BSP); (3) Services rendered to persons or entities
whose exemption under special laws or
(2) Services other than those mentioned in international agreements to which the
the preceding paragraph, rendered to a Philippines is a signatory effectively
person engaged in business conducted subjects the supply of such services to zero
outside the Philippines or to a nonresident percent (0%) rate;
person not engaged in business who is
outside the Philippines when the services (4) Services rendered to persons engaged
are performed, the consideration for which in international shipping or international
is paid for in acceptable foreign currency air transport operations, including leases of
and accounted for in accordance with the property for use thereof: Provided, That
rules and regulations of the Bangko these services shall be exclusive for
Sentral ng Pilipinas (BSP) international shipping or air transport
operations;
(3) Services rendered to persons or entities
whose exemption under special laws or (5) Services performed by subcontractors
international agreements to which the and/or contractors in processing,
Philippines is a signatory effectively converting, of manufacturing goods for an
subjects the supply of such services to zero enterprise whose export sales exceed
percent (0%) rate; seventy percent (70%) of total annual
production.
(4) Services rendered to persons engaged
in international shipping or international (6) Transport of passengers and cargo by
air transport operations, including leases of air or sea vessels from the Philippines to a
property for use thereof. foreign country; and

(5) Services performed by subcontractors (7) Sale of power or fuel generated

and/or contractors in processing, through renewable sources of energy such
converting, of manufacturing goods for an as, but not limited to, biomass, solar, wind,
enterprise whose export sales exceed hydropower, geothermal, ocean energy,
seventy percent (70%) of total annual and other emerging energy sources using
production. technologies such as fuel cells and
hydrogen fuels.
(6) Transport of passengers and cargo by
air or sea vessels from the Philippines to a (8) Services rendered to:
foreign country; and
(i) Registered enterprises within a separate
(7) Sale of power or fuel generated customs territory as provided under special
through renewable sources of energy such law; and
as, but not limited to, biomass, solar, wind,
hydropower, geothermal, ocean energy, (ii) Registered enterprises within tourism
and other emerging energy sources using enterprise zones as declared by the TIEZA
technologies such as fuel cells and subject to the provisions under Republic
hydrogen fuels. Act No. 9593 or the Tourism Act of 2009.

Provided, That subparagraphs (B)(1) and

(B)(5) hereof shall be subject to the twelve
percent (12%) value-added tax and no
longer be subject to the zero percent (0%)
VAT rate upon satisfaction of the
following conditions:

(1) The successful establishment and

implementation of an enhanced
VAT refund system that grants
 refund of creditable input tax
within ninety (90) days from the
filing of the VAT refund
application with the Bureau:
Provided, That, to determine the
effectivity of no. 1, all applications
filed from January 1, 2018 shall be
processed and must be decided
within ninety (90) days from the
filing of the VAT refund
application; and
(2) All pending VAT refund claims as
of December 31, 2017 shall be
fully paid in cash by December 31,
2019.
Provided, That the Department of
Finance shall establish a VAT
Refund center in the Bureau of
Internal Revenue (BIR) and in the
Bureau of Customs (BOC) that will
handle the processing and granting
of cash refunds of creditable input
tax.

An amount equivalent to five (5%)

of the total value-added tax
collection of the BIR and BOC
from the immediately preceding
year shall be automatically
appropriated annually and shall be
treated as special account in the
General Fund or as trust receipts
for the purpose of funding claims
for VAT Refund: Provided, That
any unused fund, at the end of the
year shall revert to the General
Fund.

Provided further, That the BIR and

BOC shall be required to submit to
the COCCTRP a quarterly report of
all pending claims for refund and
any unused fund.