Escolar Documentos
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General Principles*
Taxation, definition and concept
The inherent power of the sovereign exercised
through legislature to impose burdens upon subjects
and objects within its jurisdiction for the purpose of
raising revenues to carry out the legitimate objects of
government.
Two Fold Nature of Taxation/Nature of the Power of Taxation
1. Inherent Power an attribute of sovereignty.
a. Basis Life Blood Theory
b. Manifestations Imposition even in the
absence of constitutional grant. States
right to select objects and subjects of
taxation. No injunction to enjoin collection
of tax
2. Legislative Power High prerogative of sovereignty
a. Basis Involves promulgation of rules
b. Manifestation Prohibition on improper
delegation. The power to tax includes the
authority to
i. Determine the nature, object
extent, coverage, apportionment of
the tax, situs of the imposition, and
method of collection.
ii. Grant
tax
exemptions
or
condonations; and
iii. Specify or provide for the
administrative as well as judicial
remedies
that
either
the
government or the taxpayers may
avail themselves in the proper
implementation
of
the
tax
measure.
Life Blood Theory
Without revenue raised from taxation, the
government will not survive, resulting in detriment to
society. Without taxes, the government would be
paralyzed for lack of motive power to activate and
operate it.
References
1. Reviewer on Taxation Vol. 1 & 2 by Prof. A.
Domondon,
2. Basic Approach to Income Taxation by Justice Japar
Dimaampao,
3. Reviewer on Taxation by Prof. Victorino Mamalateo,
4. Tax Law and Jurisprudence by Justice Jose Vitug and
Justice Ernesto Acosta,
5. Reviewer on Taxation by Francisco Sababan,
6. Revenue Regulations 16-2005 Consolidated ValueAdded Tax Regulations of 2005
7. Revenue Memorandum Circular No. 50-2007
8. L. Rodriguez Common Sources of Bar Questions
9. New Cases
Reconciliation of the view that The power to tax involves the power
to destroy from The power to tax is not the power to destroy
1. The imposition of a valid tax could not be judicially
restrained merely because it would prejudice taxpayers
property.
2. An illegal tax could be judicially declared invalid and
should not work to prejudice a taxpayers property.
3. Marshals view refers to a valid tax while the Holmes
view refers to an invalid tax.
Basis of Taxation/Rationale for Taxation
1. Reciprocal duties of protection and support between the
state and its citizens and residents. Known as Symbiotic
Relation between the state and its citizen. The state
gives protection and for it to continue giving protection it
must be supported by the taxpayers in the form of taxes.
2. Jurisdiction by the state over persons and property.
Purpose/Objectives of Taxation
1. Revenue purposes. To raise revenues to meet the
legitimate objectives of government.
2. Sumptuary or regulatory purpose. The state increases
taxes on harmful substance making them more expensive,
thus limiting their consumption.
3. Compensatory Purpose. Maintain high level of
employment, control inflation, and achieved social justice
through redistribution.
4. It can also be used to implement the power of imminent
domain.
TAXATION
For revenue
Impose under the power of
taxation
No limit as to the amount
LICENSE FEE
For regulation
Under police power
Limited to the cost of the
license and the expenses of
police
surveillance
and
regulation
Before
Failure to pay the license fee
makes the business illegal
May be surrendered with or
without consideration
POLICE POWER
For general welfare
The license fee should not
exceed the cause of regulation
The feeling of having done
something
good
in
the
community
Any property other than money
which is the source of the
danger health, safety, or morals
Destructive; the property taken
is destroyed.
Superior
Regulates
property
5.
Exceptions
1. Where there is a personal injury
2. Where there is an allegation of violation of a specific
constitutional limitation on the taxing and spending
power and not merely an incidental expenditure under
police power
3 stages or aspects/process of taxation
1. LEVYING the act of the legislature in choosing the
persons, properties, rights or privileges to be subjected to
taxation.
2. ASSESSMENT and COLLECTION This is the act of
executing the law through the administrative agencies
of government.
3. PAYMENT the act of the taxpayer in settling his tax
obligations.
Situs of Taxation
The place or authority that has the right to impose and
collect taxes.
Comity
GENERAL OR INDIRECT
Due Process Clause
Equal Protection Clause
Freedom of the Press
Religious freedom
No taking of private property without just
compensation
Non-impairment clause
Art. VI Sec. 26
Art. VII Sec. 19
2.
DIRECT OR SPECIFIC
Publication
Double Taxation
Religious Freedom
The constitutional guaranty of the free exercise and
enjoyment of religious profession and worship carries
with it the right to disseminate religious information. Any
restraint of such right can only be justified like other
restraints of freedom of expression on the grounds that
there is a clear and present danger of any substantive evil
which the State has the right to prevent [AMERICAN
BIBLE SOCIETY v. CITY OF MANILA]
Non-impairment clause
If the tax exemption was granted for a consideration, it is
in the nature of a contract, protected by the non5
3.
5.
4.
3.
Determination of Amount
Specific imposed base on some standard of weight
or measurement and which requires no assessment
beyond a listing and classification of the object to be
taxed.
Ad valorem Imposed based on a specific
proportion of the value fixed by law or as appraised
Mixed imposes both specific and ad valorem.
4.
Purpose
General, fiscal or revenue impose for the purpose
of raising public funds for the service of the
government.
TAX AMNESTY
Immunity from all criminal, civil
and administrative liabilities
arising from non-payment of
taxes
Applies only to past tax periods
TAX EXEMPTION
Immunity from civil liability
only.
5.
Graduation or Rate
Proportional - which increases or decreases in
relation to the bracket.
Progressive or graduated increases as the income
of the taxpayer goes higher.
Regressive decreases as the income of the
taxpayer goes higher.
6.
Tax
Tax Pyramiding
The practice of imposing tax upon another tax. It is
prohibited as a taxpayer cannot be compelled to pay a
tax on the tax itself [PEOPLE v. SANDIGANBAYAN]
GR Taxes cannot be the subject of compensation or set-off:
Exceptions
6
Tax Avoidance
Tax saving device within the means sanctioned by law.
This method should be used by the taxpayer in good faith
and at arms length.
Tax Evasion
A term that connotes fraud through the use of pretenses
and forbidden devices to lessen or defeat taxes.
Factors to determine tax evasion
1. The end to be achieved, i.e., the payment of less than that
known by the taxpayer to be legally due, or the nonpayment of tax when it is shown that a tax is due;
2. An accompanying state of mind which is described as
being evil, in bad faith, willfull,or deliberate and
not accidental; and
3. A course of action or failure of action which is unlawful
[CIR v. TODA 438 SCRA 290]
TAX AVOIDANCE
legal and not subject to
criminal penalty
It is minimization of taxes
TAX EVASION
illegal and subject to criminal
penalty
almost always results in
absence of tax payments
1.
2.
3.
iii.
1.
2.
3.
4.
5.
Pre-emptive embargo
Refers to the power of the CIR to place under constructive
distraint the property of a delinquent taxpayer, or of any
taxpayer, who in his opinion performs any act tending to
9
SEC
15.
The
Commissioner,
the
Deputy
Commissioners, the Revenue Regional Directors, the
Revenue District Officers and other internal revenue
officers shall have authority to make arrests and seizures
for the violation of any penal law, rule or regulation
administered by the Bureau of Internal Revenue. Any
person so arrested shall be forthwith brought before a
court, there to be dealt with according to law.
Non-Retroactivity of Rulings
d.
e.
f.
**Income tax
A tax on the yearly profits arising from property,
professions, trades, and offices.
PROPERTY TAX
The incidence of a property tax
on the property itself
Measured by the value of the
property at a particular date
May be taxed on a recurrent
basis
The tax on property is
predicated
upon
the
governmental
protection
extended to the property itself
10
SCHEDULAR TREATMENT
There are different tax rates
There are different categories
of taxable income
GLOBAL SYSTEM
There is a unitary or single
tax rate
There is no need for
classification as all taxpayers
are subjected to a single
rate.
Usually
applied
to
corporations
Allowable deduction for resident citizens and resident aliens who are
self-employed or are engaged in the practice of a profession
a. Basic personal & additional exemptions [Sec. 35]
b. Optional standard deductions or the itemized deductions
[Sec. 34L]
c. Premium payments on health and hospitalization
insurance [Sec. 34M]
Resident Citizen
A citizen of the Philippines who stays in the Philippines
without the intention of transferring his physical presence
abroad whether to stay permanently or temporarily.
TAXATION OF RESIDENT CITIZEN on income derived from selfemployment; trade or business or profession
Non-resident Citizen
1. A citizen of the Philippines who establishes to the
satisfaction of the Commissioner the fact of his physical
presence abroad with a definite intention to reside
therein.
2. A citizen of the Philippines who leaves the Philippines
during the taxable year to reside abroad, either as an
immigrant or for employment on a permanent basis.
TAXATION OF NON-RESIDENT CITIZEN
a.
b.
c.
d.
e.
3.
f.
Resident Alien
An individual whose residence is within the
Philippines and who is not a citizen thereof
TAXATION OF RESIDENT ALIEN
Same in non-resident citizen
a.
c.
d.
b.
c.
d.
e.
f.
g.
a.
b.
CORPORATIONS
a.
b.
c.
d.
Note
Exceptions
1.
2.
c.
d.
f.
g.
h.
Note
1.
2.
e.
3.
2.
1.
2.
Requisites
1. The persons, excess baggage, cargo, and the mail
must be originating in the Philippines.
2. In a continuous and uninterrupted flight or shipment.
If the stopover does not exceed 48 hrs. It is still
considered as uninterrupted; otherwise the
flight is not continuous and uninterrupted.
3. Irrespective of the place of sale or issue and the place
of payment of the ticket or passage document.
Exception if the place of sale or issue and the place of
payment of the ticket or passage document will only
become material if the other 2 elements are not
present. In that case, the final tax of 2 on GPB is
inapplicable.
Formula
Gross Income x Tax rate = Tax Due
Features
1. Does not allow deductions, personal and additional
exemptions.
2. The application of this tax bars the application of the net
income tax. The two taxes cannot be imposed
simultaneously.
3. Always subject to the final withholding tax.
4. Computed by multiplying the total income received to the
tax rate. The income is considered collectively, as a whole,
total.
17
ADVANTAGES OF GROSS
INCOME TAXATION
Simplifies the income tax
system
Does away with wastages of
manpower and supply
Substantial
reduction
in
corruption and tax evasion
exercise of discretion to allow
or
disallow
deduction
dispensed with
ADVANTAGES OF NET
INCOME TAXATION
Fair and just due to grant of
deductions
Tax audit minimizes fraud
DISADVANTAGES OF GROSS
INCOME TAXATION
No
deductions
and
exemptions allowed
DISADVANTAGES OF NET
INCOME TAXATION
Vulnerable to corruption on
account
of
margin
of
discretion in the grant of
deductions
Confusing
and
complex
process of filing ITR
Difficult/costly to administer
6.
Passive income
Income derived from any activity in which the taxpayer
does not materially participate.
b.
c.
d.
Features
1. The rate is multiplied to each income, individually and
not collectively. Each income may have a different
rate, as the case may be.
2. Does not allow deductions, personal and additional
exemptions.
3. The determination of gain or loss is immaterial since
the basis of the tax is the gross income, hence actual
gain or loss does not matter.
4. An income which is subject to final tax is no longer
subject to net income tax.
Reason double taxation. However, the
prohibition is with respect only to a particular
income and not the taxpayer, thus, a taxpayer
may pay both final income tax and net income
tax but the subject income of the two taxes are
different.
Applicable only to passive income and income from
sources within the Philippines.
Reason - Income from sources without the
Philippines cannot be subject to final income
tax because as a general rule, final income tax is
subject to final withholding tax. Since there are
no withholding agents outside of the
Philippines, final income tax cannot be
imposed.
Provided, further, That interest income from longterm deposit or investment in the form of savings,
common or individual trust funds, deposit
substitutes, investment management accounts and
other investments evidenced by certificates in such
form prescribed by the BSP shall be exempt from
the tax imposed under this Subsection:
Formula
Gross Income x Tax Rate = tax Due
5.
a.
*Ordinary income
The gains derived from the disposal or used of ordinary
assets. It includes any gains from the sale or exchange of
property which is not a capital asset or property.
2.
19
Capital Assets
Property held by the taxpayer (whether or not
connected with his trade or business), but does not
include
1. stock in trade of the taxpayer or
2. other property of a kind which would properly
be included in the inventory of the taxpayer if
on hand at the close of the taxable year, or
3. property held by the taxpayer primarily for
sale to customers in the ordinary course of his
trade or business, or
4. property used in the trade or business, of a
character which is subject to the allowance
for depreciation provided in Subsection (F) of
Section 34; or
5. real property used in trade or business of the
taxpayer [Sec. 39 A1]
5.
*Ordinary Gain
Any gain from the sale or exchange of property which are
not a capital asset or property.
Ordinary loss
Includes any loss from the sale or exchange of property
which is not a capital asset.
***CAPITAL GAIN
The source is property which
not used in trade or business
Generally no deductions are
allowed from capital gains
CAPITAL GAIN SUBJECT TO
FINAL TAX
There is a fixed rate for tax
which is charged without
benefit of deductions
ORDINARY GAIN
The source is property used in
trade or business
Deductions are usually allowed
The
holding
considered.
period
is
20
It could be availed
Capital gains from Sale of Shares of Stock not traded in the Stock
Exchange
The basis of the tax is the net capital gain and not the
length of time by which the taxpayer held the shares of
stock.
Elements
1. The shares are shares in a domestic corporation.
If the shares are from a foreign corporation The
income tax liability will depend upon the place where
the shares are sold is material.
2. Classified as capital asset.
21
3. The stocks are not listed and traded in the local stock
exchange.
Not sold or disposed through a local stock exchange or through
initial public offering the tax is
1. 5% of net capital gain if not over P100, 000.00 or
2. 10% of net capital gain if over P100, 000.00
Tax treatment of capital gains and capital losses for personal
Property
1. Holding Period Rule - In the case of a taxpayer, other
than a corporation, only the following percentages of
the gain or loss recognized upon the sale or exchange
of a capital asset shall be taken into account in
computing net capital gain, net capital loss, and net
income:
1. 100% if the capital asset has been held for
not more than 12 months; and
2. 50% if the capital asset has been held for
more than 12 months [Sec. 39 B]
2.
3.
***Types of Exclusions
1. Temporary Exclusions Exclusions from gross income
which results from timing of recognition of income.
These are income which are deferred recognition for
income tax purposes.
2. Substantive Exclusions Receipts which are not
considered as income. Although exclusions are exempt
from income taxation, they may still be taxed under the
NIRC such as
a. Gifts, bequest and devises may be subject to
donors taxes [Sec. 98-104] 2]
b. Income derived from any public utility may
subject to Other Percentage Tax [Sec. 117-120].
EXCLUSIONS FROM GROSS
INCOME
Refer to a flow of wealth to
the taxpayer which are not
treated as part of gross
income for purposes of
computing the taxpayers
taxable income due to the
following reasons 1] It is
exempted by the fundamental
law 2] It is exempted by
statute 3] it does not come
within the definitions of
income
Pertain to the computation of
gross income
Something received or earned
by the taxpayer which do not
form part of gross income
Endowment
The insurer agrees to pay a sum certain to the insured
if he outlives a designated period. If he dies before
that date, the proceeds are to be paid to the
designated beneficiary.
***Tax treatment of proceeds received under endowment
policies
a. If the insured dies, and the beneficiary receives the
life insurance proceeds, these are not taxable income
because they are excluded from gross income
b. If the insured does not die and survives the
designated period, the amount pertaining to the
premiums are excluded from gross income but the
excess shall be considered part of his gross income.
Requisites
1. The retiring official or employee is at least 60 years old
but not more than 65.
2. He must have served the company for at least 5 years.
Terminal Leave Benefits
The commutation or monetarization of an employees
accumulated and unused vacation leave and sick leave.
25
ii.
iii.
iv.
7] MISCELLANEOUS ITEMS.
CAPITAL
Capital is wealth or fund
INCOME
Profit or gain from the flow of
26
Capital is wealth
Capital is the tree
wealth
It is the service of wealth
income is the fruit
***Realization Principle
Revenue is generally recognized when both of the
following conditions are met
1. The earning process is complete or
virtually complete and
2. An exchange has taken place.
4.
5.
6.
b. Gross Income
The income required to be reported less income which is
by statutory definition or otherwise exempt from the tax
imposed by law.
Formula
All income Exclusions = Gross Income
Gross Income
2.
3.
4.
5.
6.
Annuities;
9.
Dividends;
8.
Rents;
Royalties;
7.
2.
C] Change of Status.
If the taxpayer marries or should have additional
dependent(s) as defined above during the taxable year,
the taxpayer may claim the corresponding additional
exemption, as the case may be, in full for such year.
3.
Capital expenditures
a. Any amount paid out for new buildings or
for
permanent
improvements,
or
betterments made to increase the value of
any property or estate;
b. Any amount expended in restoring
property or in making good the exhaustion
thereof for which an allowance is or has
been made; Reason There are no expenditures
b.
Capital Expenditures
A cash outlay or exchange of property that does not
decrease a taxpayers assets but merely changes its
form.
Expenditures
for
replacements,
alterations
improvements or additions which prolong the life of
the property is capital in nature.
ALLOWABLE DEDUCTIONS
Amount - generally refer to
actual expenses incurred in
the
pursuit
of
trade,
business or practice of
profession
Nature - constitute business
expenses
Purpose - allowed to enable
the taxpayer to recoup his
cost of doing business
Claimants - can be claimed
by all taxpayers, corporate
or otherwise
PERSONAL EXEMPTIONS
Arbitrary amounts allowed by
law.
by
Business
or
Necessary expenses
Presupposes that in order to be allowed as deduction, the
expenses must be business connected.
31
b.
c.
d.
e.
*Taxes
a.
f.
3.
DEDUCTION
Reduces taxable income upon
which the tax liability is
calculated
Subtracted from the income
before the tax is computed
Limitations on credit
Formula
2 Limitations
1. The Tax credit for taxes paid or incurred in any foreign
country should not exceed the taxes from which the tax
credit is taken
2. Said tax credit should be compared with the tax to be paid
in the Philippines by the taxpayer and such credit should
not exceed the amount of the tax to be paid in the
Philippines.
*** Losses
The law does not require that the loss must be the
result of transactions in the taxable year only. What
the law requires is that the loss must be actually
sustained in the taxable year and not compensated by
insurance or otherwise.
Casualty
Complete or partial destruction of property resulting
from identifiable event of a sudden unexpected or
unusual nature. It denotes accident, some sudden
invasion by hostile agency, and excludes progressive
deterioration through steadily operating cause.
2.
Related Provisions
Sec. 39 C] Limitation on Capital Losses.
such transactions.
Wash sale
Purchase and sale of substantially identical stock or
securities within a period provided by law.
GR on losses from wash sale
Losses from wash sales of stock or securities incurred
by taxpayers other than dealers in stock or securities
are treated in the same manner as other capital
assets.
Exception
Losses from wash sales of stock or securities
deductible only by a dealer in stock or securities not
by other taxpayer.
Purpose of non-deductibility
To prevent taxpayers from claiming losses when
actually there are none.
**Bad Debts
c.
d.
Requisites
1. The property subject to depreciation must be
property with life of more than one taxable year.
2. The property depreciated must be used in trade,
business or exercise of a profession
3. The depreciation method used must be reasonable
and consistent
4. The depreciation must have been charged during the
taxable year
5. The depreciation schedule should be attached to the
income tax return.
Depreciation
The gradual diminution in the useful value of tangible
property resulting from wear and tear and normal
obsolescence.
Finance,
upon
DEPLETION
The
asset
subject
depletion could not
replaced
to
be
DEPRECIATION
Could be replaced
**Depreciation of goodwill
Goodwill may or may not be the subject of
depreciation. If cost is paid or incurred in the
acquisition then it may be subject to depreciation. On
the other hand, goodwill that is internally generated
is not subject to depreciation.
Depletion of Oil and Gas Wells and Mines
36
per family or P200 a month paid during the taxable year for
health and/or hospitalization insurance taken by the
taxpayer for himself, including his family, shall be allowed
as a deduction from his gross income:
Provided, That said family has a gross income of not more
than P250,000 for the taxable year:
Provided, finally, That in the case of married taxpayers,
only the spouse claiming the additional exemption for
dependents shall be entitled to this deduction.
Research and Development
Donations
to
Accredited
Nongovernment
Organizations
Donations of prizes and awards to athletes [RA 7549
Sec. 1]
Exceptions
1. Gains recognized but loss not recognized in transactions
between related parties [Sec. 36 B] means if there is an
exchange of property and there is a gain, the resulting
gain is subject to tax but if there is a loss, the loss is not
allowed as deduction from gross income.
Losses from Sales or Exchanges of Property - In computing net
a.
b.
a.
General Rule
The value of employer furnished quarters or meals
are considered as part of compensation income.
Exceptions or instances when the value of employer furnished
quarters or meals are not part of compensation income
1. Application of the convenience of the employer rule
means that if the living quarters or meals are
furnished to an employee for the convenience of the
employer, the value thereof need not be included as
part of compensation income.
2. Given to non-rank and file employees subject to
fringe benefit tax.
3. The value of housing privileges not treated as fringe
benefits.
Illustration of Par. 1
For a given taxable quarter ABC Corp. has output VAT of 100
and input VAT of 80. Since output tax exceeds the input tax for
such taxable quarter, all of the input tax may be utilized to
offset against the output tax. Thus, the net VAT payable is 100
minus 80 = 20.
Illustration of Par. 2
For a given taxable quarter XYZ Corp. has output VAT of 100
and input VAT of 110. Since input tax exceeds the output tax
for such taxable quarter, there is an excess input tax at the end
of the quarter which may be carried over to the next quarter or
quarters [RR 4-2007]
Tax Credit Method/Invoice method
Refers to the manner by which the VAT of a taxpayer is
computed.
Output Tax
Means the VAT due on the sale or lease of taxable
goods or properties or services by any person
registered or required to register under the Code.
Input Tax
Means the VAT due from or paid by a VAT-registered
person in the course of his trade or business on
importation of goods or local purchase of goods or
services, including lease or use of property, from a
VAT-registered person.
Sales
Output tax [100 x
12%]
Purchases
Input tax [90 or 130
x 12%]
Value Added
VAT
payable
[10x12%]
Excess input tax [30 x 12%]
Case A
Amount VAT
100
12
Case B
Amount Vat
100
12
90
130
10.8
10
15.6
-30
1.2
3.6
Sales tax
GR there must be an actual sales of goods, properties or
services in the Phil. in order that the VAT may be imposed
Exceptions
1. Importation of goods
2. Deemed sale of goods or properties
3. Deposit on returnable containers
Taxable transactions
The main objective of the VAT is the transaction. A
transaction could either be
1. Sale, barter or exchange of goods or properties
in the course of trade or business
2. Sale of services in the course of trade or
business
42
Indirect Tax
The impact of taxation is on the seller upon whom the
tax has been imposed, while the incidence of tax is on
the final consumer, the place at which the tax comes
to rest.
Cumulative through the chain of distribution of goods and
performance of service
This means that on the taxable transaction, the seller
is subject to output tax on his gross selling price or
gross receipts, while the buyer is entitled to input tax
on his purchases. When there is a new sale of the
same goods, properties or services, the new seller is
subject to the output tax and the new buyer is
entitled to input tax. This procedure is repeated until
the last sale to the final consumer, in which case, the
input tax passed on to the final consumer becomes
part of his acquisition cost or operating expenses.
VAT does not cascade
A tax is said to cascade when there is a tax on tax or
the tax passed on by the previous seller which is now
a component of the gross selling price or gross
receipts of the present seller is being taxed.
There is no cascading because
1. In defining the terms gross selling price and
gross receipts, the VAT law expressly
exclude the VAT passed on by the seller to
the buyers.
2. Moreover, the input tax due from or paid
by the buyer are allowed to be credited
against his output taxes.
Registration
A taxable person must register for VAT purposes
[SEC.236]. However his failure to register as a VAT
person does not exculpate him from his liability to
pay the VAT on his taxable sales of goods, properties
or services. Registration is only important because a
non- VAT registered person is not entitled to input tax
although he is always liable to output tax on his
taxable sales.
Tax Base
The amount or value on which the VAT rate will applied in
computing thee output tax.
Persons Liable
Zero-Rated Sales
A zero-rated sale by a VAT-registered person is a
taxable transaction for VAT purposes, but shall not
result in any output tax. However, the input tax on
purchases of goods, properties or services, related to
such zero-rated sale, shall be available as tax credit or
refund.
Effectively Zero-rated
Refers to the local sale of goods and properties by a
VAT-registered person to a person or entity who was
granted indirect tax exemption under special laws or
international agreement. Since the buyer is exempt
from indirect tax, the seller cannot pass on the VAT
and therefore, the exemption enjoyed by the buyer
shall extend to the seller, making the sale effectively
zero-rated.
Authority of the Commissioner to Determine the Appropriate Tax
Base
VAT-exempt transactions
Refers to the sale of goods, properties or services or
the use or lease of properties that is not subject to
VAT [output], and the seller/supplier is not allowed
any tax credit of VAT (input tax) on purchases related
to such exempt transaction.
Categories of exemption
1. Exempt persons The seller or the buyer or importer
is not liable to VAT
2. Exempt transactions transaction in certain goods,
properties or services, which are not subject to VAT,
even if such goods or services are sold by a VAT
registered person , and regardless of the annual gross
sales or receipts derived therefrom.
45
46