ALL ABOUT VALUE ADDED TAX

Atty. Vic C. Mamalateo

Oct 16, 2014
POWERMAX CONSULTING, Crowne
Plaza, Quezon City
 DUTIES OF VAT TAXPAYERS
1. Secure Taxpayer Identification Number (TIN)
2. Pay annual registration fee of P500 for every separate and distinct establishment
Rev Regs No. 7-2012, Apr 2, 2012 (primary and secondary registration)
Rev Regs No. 10-2012, June 1, 2012 (JV undertaking construction)
3. Register with BIR proper office as VAT or Non-VAT taxpayer and get BIR
Certificate of Registration (BIR Form 2303)
4. Apply for Authority To Print (ATP) as well as register and issue VAT and/or Non-
VAT sales invoices or receipts
RMC 54-2013, Aug 15, 2013 (extends provisional accreditation of printers)
RMC 52-2013, Aug 12, 2013 (validity of unissued invoices/receipts prior to Jan 18, 2013)
5. Keep registered VAT books of accounts (computerized or manual)
6. File VAT returns/declarations and pay VAT
RR 1-2013, Jan 23, 2013 (eFPS); RMC 56-2013, Aug 29, 2013 (extends filing date from Aug 20-
22 to Aug 23)
7. Withhold and remit Final Withholding VAT, when appropriate
8. Submit SLS/SLP
Rev Regs No. 1-2012, Feb 20, 2012
 VAT (TITLE IV, NIRC)
E.O. 273 (Original VAT Law) Jan 1, 1988; RR 5-87
R.A. 7643(Required monthly payment of VAT); RR 5-93
R.A. 7716 (Expanded VAT Law) Jan 1, 1996; RR 10-94, as amended by RR
11-94 and RR 14-94, and further amended by RR 6 &-95 and RR 5-96
R.A. 8241 (Improved VAT Law) Jan 1, 1997; RR 6-97
R.A. 8424 (Tax Reform Act of 1997) Jan 1, 1998; RR 8-99, as amended by
RR 19-99
R.A. 8761 (Re-imposed 7% brokers tax on all brokers, in lieu of VAT, for CY
2000 only)
R.A. 9010 (Extended 7% brokers tax for CY 2001-2002)
R.A. 9238 (Exempted banks, finance companies, doctors of medicine and
lawyers from VAT) Feb 5, 2004
R.A. 9337 (Reformed VAT Law) Nov 1, 2005; RR 14-05, as amended by RR
16-05, Sept 1, 2005
R.A. 9361 (Removed the 70% cap on input taxes); RR 2-07, Dec 22, 2006
 OTHER PERCENTAGE TAXES (TITLE V, NIRC)
Sec. 116 3% percentage tax on sale or lease of goods, properties or services of
non-VAT registered persons whose annual gross sales or receipts do not exceed
P1.5 M
Sec. 117 3% common carriers tax on domestic common carriers by land on
transport of passengers and keepers of garages
Sec. 118 3% common carriers tax on international air and sea carriers
RMC 40-2013, May 14, 2013 (RA 10378 exemption of intl air carriers from GPB, reciprocity)
Sec. 119 3% franchise tax on grantees of radio and/or TV broadcasting whose
gross receipts do not exceed P10 M and 2% franchise tax on grantee of gas and
water utilities
Sec. 120 10% overseas communication tax on dispatch originating from the Phil
Sec. 121 Gross receipts tax on banks
Sec. 122 Gross receipts on finance companies
Sec. 123 2% premium tax on life insurance companies per RA 10001 and RMC
22-2010, March 9, 2010
Sec. 125 Amusement tax on proprietors, lessees or operators of cockpits,
cabarets, night or day clubs (18%), boxing exhibitions (10%), professional
basketball games (15%) and race tracks (30%)
 EXCISE TAXES (TITLE VI, NIRC)
General provisions: Secs. 129-132, NIRC
Exemption or conditional tax-free removal of articles: Secs. 133-140, NIRC

Excise tax on alcohol products: Secs. 141-143, NIRC

Wine, scotch, vodka, beer, etc.
Excise tax on tobacco products: Secs. 144-147, NIRC
Cigarettes, tobacco, etc.
Excise tax on petroleum products: Sec. 148, NIRC
Premium gas, diesel, bunker fuel, LPG, etc.
Excise tax on miscellaneous products: Secs. 149-150, NIRC
Automobiles any 4 or more wheeled motor vehicle, regardless of seating
capacity, which is propelled by gasoline, diesel, electricity or any other motive
power, except buses, trucks, cargo vans, jeeps/jeepneys, single cab chassis, and
special purpose vehicles (e.g., funeral cars).
Non-essential goods (jewelry; pearls, precious and semi-precious stones; perfumes
and toilet waters; yachts and other vessels for pleasure or sports.
Excise tax on mineral products: Secs. 151, NIRC
Gold, silver, copper, etc.
 BUSINESS TAXES
VAT (Title IV, NIRC)
Taxable transactions
Sale or lease of goods or
properties; excise tax forms
part of GSP
Sale or exchange of services
Importation of goods
Formula
Output Tax
Less: Input Tax
VAT Payable/(Excess Input
Tax)
NON-VAT/EXEMPT FROM
VAT
Transaction is subject to
Other Percentage Tax (Title V,
NIRC)
Tax is imposed on Gross
Receipts or Gross Income
VAT is imposed on GSP, in
addition to Excise Tax on
transaction (Title VI, NIRC)
No VAT or OPT is imposed
on transaction (Sec 109 & 116,
NIRC)
 VAT FORMULA
Case A Case B
Amt VAT Amt VAT

Sales 100 100

Output tax (100 x 12%) 12.0 12.0
Purchases 80 130
Input tax (80/130 x 12%) 9.6 15.6
Value added 20 (30)
VAT payable (20 x 12%)/ 2.4
(Excess input tax) (30 x 12%) (3.6)
 SEC 105: PERSONS LIABLE TO VAT
Seller of goods or properties
There is actual or deemed sale, barter or exchange of goods or
properties that are consumed or for consumption in the Phil;
In the course of trade or business; and
Sale of goods or properties is not exempt from VAT
Tax base is Gross Selling Price and rates are 12% or 0%
Seller of services
Listed services are performed or to be performed in the Phil for
a fee or compensation
In the course of trade or business or exercise of profession; and
Sale of services is not exempt from VAT
Tax base is Gross Receipts and rates are 12% or 0%
Importer of goods
Whether done in the course of his trade or business or for
personal consumption
Tax base is Transaction Value used by BOC and rate is 12%
SEC 106 & 109: SALE OF GOODS
REQUISITES FOR TAXATION
A. There is actual or deemed sale, barter or exchange of
goods or properties that are located and consumed (or for
consumption) in the Philippines;
B. In the course of trade or business or exercise of
profession in the Philippines; and
C. Sale of goods or properties is not exempt from VAT
under Sec 109, NIRC or special law
D. Seller is VAT-registered person or non-VAT-registered
person who issued a VAT invoice or official receipt
Taxable base of VAT Output Tax on sale of goods is
Gross Selling Price
Output tax is the VAT on the taxable sale of goods or
properties
Applicable VAT rate is 12% or 0%
SEC 106 & 109: SALE OF REAL PROPERTY
REQUISITES FOR TAXATION
Seller executes a document of sale; it is not necessary that
the sale is consummated.
Deed of Absolute Sale
Conditional Sale
Contract To Sell
Real property is located in the Philippines
Real property is held primarily for sale or for lease in the
ordinary course of trade or business; and
Seller is engaged in real estate business either as dealer,
developer or lessor
Real property is NOT a capital asset
Sale is not exempt from VAT under Sec 109, NIRC or special
law
SEC. 109: EXEMPT SALE OF REAL PROPERTY
P. Sale of real property not primarily held for
sale to customers or for lease in the ordinary
course of trade or business, or real property for
low-cost and socialized housing, residential lot
valued at P1.5 M (P1,919,500 beginning 2012)
or below, house and lot and other residential
dwellings valued at P2.5 M (P3,199,200
beginning 2012 [RR 16-2011, Oct 27, 2011]; RR 3-2012, Feb 20, 2012) or
below
This threshold is on a per transaction basis.
RR 13-2012, Oct 12, 2012 Sale of adjacent lots
or units within a 12-month period and parking
slots to the same buyer for purposes of utilizing
as one residential area
TAX BASE:SALE OF GOODS OR PROP
Excise tax, if any, shall form part of GSP.
Interest on in-house financing of installments sale of real
property is subject to VAT output tax.
Sales discounts determined and granted at the time of
sale, which are expressly indicated in the sales invoice do
not form part of the tax base. Grant of discount must
not depend upon the happening of a future event or the
fulfillment of certain condition. They must be recorded in
the books of accounts of the seller.
20% sales discounts to senior citizens under RA 9257
(Amended Senior Citizens Law) dtd Feb 26, 2004 shall be
deducted from gross sales before applying the VAT rate.
But Sec 4(a) of RA 9994(Expanded Senior Citizens Act)
dtd Feb 15, 2010 grants 20% discounts and exempts the
transaction from VAT on sales of goods and services
covered by the law.
SEC 107: IMPORTATION OF GOODS
REQUISITES
There is importation of taxable goods, whether or not connected with the
trade or business or exercise of profession of the importer
TAX BASE
Total value used by the Bureau of Customs in determining tariff and customs
duties, plus customs duties, excise taxes, if any, and other charges
Where customs duties are determined on the basis of quantity or volume of
the goods, VAT shall be based on the landed cost plus excise taxes, if any
VAT TO BE PAID
By the importer prior to release of the goods from customs custody
In case of transfer of goods by tax-exempt persons to non-exempt persons, the
purchaser or transferee or recipient shall be considered the importer thereof,
liable to VAT.
VAT RATE
12%
Destination principle
SEC 108 &109: SALE OF SERVICES
REQUISITES FOR TAXATION
There is a sale or exchange of service, including the use or lease
of properties
In contract of lease or licensing agreement, it is required that the
property is leased or used in the Philippines, regardless of the place
where the contract is executed by the parties.
The service performed by a person is listed in the term sale or
exchange of services as defined in the Tax Code, including the
lease or use of or the right or privilege to use any copyright,
patent, design, and other intellectual property or right
The listed service is performed or to be performed in the
Philippines for another person for a fee, remuneration or
consideration; and
The transaction is not exempt from VAT under Sec 109, NIRC, or
special law.
SEC 108 & 109: SALE OF SERVICES
Construction and service contractors
Health Maintenance Organization (HMO) acts like an
independent contractor taxed on entire gross receipts
Security agency (taxed only on its agency fee,
provided that there is proper segregation between the
fee and salary of security guards) vs. employment and
janitorial agencies (taxed on its entire gross receipts)
Travel agency: Hotel room charges for foreign tourists
and travel agencies are not part of its gross receipts
Brokers
Reimbursement of expenses are not subject to VAT if
receipts or invoices are issued in the name of principal
SEC 108: SALE OF SERVICES
TAXABLE BASE
Gross receipts means the total amount of money or its
equivalent, representing the contract price, compensation,
service fee, rental or royalty, including the amount charged for
materials supplied with the services and deposits and advance
payments actually or constructively received during the taxable
quarter for the services performed or to be performed for
another person, excluding the VAT, except those amounts
earmarked for payment to unrelated third party or received as
reimbursement for advance payment on behalf of another,
which do not redound to the benefit of the payor.
For sale of services, the test is not whether services have been
performed or not, but whether amount of compensation or fee
is received, actually or constructively. The rule is: NO RECEIPT
OF PAYMENT, NO VAT LIABILITY.
RMC 16-2013, Feb 15, 2013 (Deposits/advances not covered by
RMC 89-2013 (GPP)
A contractor that agrees to provide the materials and labor for a
construction project is a seller of services for the entire amount
of consideration.
SEC 110-111: INPUT TAXES
CATEGORIES OF INPUT TAXES
Input tax credit on importations of goods and
current local purchases of goods, properties and
services
Input tax on capital goods must be amortized
over certain period
Transitional input tax credit
Presumptive input tax credit
Withholding input tax credit
Excess input tax credit
SEC 110-111: INPUT TAXES
Input tax on capital goods
Capital goods are fixed assets with estimated useful lives of more
than one year used in the trade or business of the taxpayer and are
subject to depreciation.
If the aggregate acquisition cost (exclusive of VAT) in a calendar month
exceeds P1 million, and (a) the estimated useful life of the asset is 5
years of more, the total input tax shall be amortized over a period of
60 months, or (b) the estimated useful life is less than 5 years, the
total input tax shall be amortized over the estimated useful life of the
asset.
If the aggregate acquisition cost (exclusive of VAT) in a calendar month
does not exceed P1 million, the total input tax will be allowed as credit
against the output tax in the month of purchase.
Construction in Progress refers to cost of construction work that is
not yet completed. It is not a capital asset, but is treated as a sale of
service; hence, not covered by the rules on capital goods.
SEC 112: INPUT TAXES
Allocation of input taxes
Input taxes directly attributable to transactions subject to
VAT are creditable against output tax;
Input taxes attributable to exempt transactions become
part of the cost or expense;
Input taxes that are not directly attributable to VATable
and/or VAT-exempt transactions shall be allocated as
follows:
Input tax attributable to exempt sales = Exempt sales/Total sales
Input tax attributable to taxable sales = Taxable sales/Total sales
Input taxes attributable to sales to government are not
creditable against output tax from sales to non-govt offices
SEC 112: INPUT TAXES
Allocation of input taxes
Input taxes directly attributable to zero-rated sales may be
claimed as refund or tax credit or credited against output
tax for the period;
Input taxes directly attributable to taxable sales (not zero-
rated) are creditable against output tax for the period;
Input taxes that are not directly attributable to zero-rated
and/or taxable sales shall be allocated as follows:
Input tax attributable to zero-rated sales = Zero-rated sales/Total
sales
Input tax attributable to taxable sales = Zero-rated sales/Total sales
SEC. 112: REFUND/TAX CREDIT OF INPUT TAX

Tax reliefs of VAT taxpayers on their excess input

taxes (EIT) attributable to zero-rated and effectively
zero-rated sales
Carry over the excess input tax to the next quarter, until
excess is utilized
File a claim for refund
File a claim for tax credit, within two years after the close
of taxable quarter where the sales were made, (NOT from
the filing of the quarterly VAT return)
For non-zero-rated sales, remedy available is only to
carry over EIT to the next quarter(s), or to dissolve
the corporation or cease operation of business
subject to VAT within 2 years from date of dissolution
or cessation of business
RMC 57-2013, Aug 23, 2013
BIR RULING 123-2013, Mar 25, 2013
Unutilized creditable input taxes attributable to
zero-rated sales can only be recovered through
the application for refund or tax credit.
Unapplied input taxes after the expiration of the
two-year period prescriptive period may not be
expensed outright.
Tax exemptions are strictly construed against the
taxpayer.
Deductions are in the nature of tax exemptions.
CIR v. SAN ROQUE POWER CORP, TAGANITO MINING CORP,
PHILEX MINING CORP , G.R. 187455, 196113 & 197156, Feb 12,
2013
San Roque v. CIR (Feb 2013)
Mar 28, 2003 San Roque filed amended administrative claim with BIR
Apr 10, 2003 It filed petition for review with CTA (i.e., after 13 days)

SC RULING
1. San Roque must comply with the 120-day waiting period. This is
mandatory and jurisdictional. Failure to comply with the 120-day waiting
period violates the doctrine of exhaustion of administrative remedies and
renders the petition PREMATURE and without a cause of action; hence,
the court cannot acquire jurisdiction.
The 120-day period may extend beyond the two-year period, as long as
the administrative claim is filed within the two-year period (after the close
of the quarter when the zero-rated sales were made). The two-year period
does not refer to the filing of the judicial claim with the CTA but to the
filing of the administrative claim with CIR.
 CIR v. SAN ROQUE POWER CORP
If he files his claim on the last day of the two-year period, his claim
is still filed on time. The CIR will have 120 days from such filing to
decide the claim.
2. CTA charter: CTA can review on appeal decisions of CIR involving
claims for refunds, or in case of inaction, which is deemed a denial.
In this case, there is no CIR decision to be reviewed by the CTA.
3. Art. 5, NCC: Acts executed against mandatory or prohibited laws
shall be void, except when the law itself authorizes its validity. Here,
there is no such law.
4. A person committing a void act contrary to the mandatory
provision of law cannot claim or acquire any right from his void act.
This doctrine is repeated in Art. 2254, NCC.
 PHILEX MINING CORP v. CIR
PHILEX MINING v. CIR (2013)
Oct 21, 2005 Philex filed original VAT return for Q3
2005
Mar 20, 2006 It filed administrative claim with BIR
Oct 17, 2007 It filed petition for review with CTA

SC RULING
1. Philex timely filed its administrative claim. Even if
the 2-year prescriptive period is computed from the
date of payment of the output tax under Sec 229, it
filed its claim on time.
PHILEX MINING CORP v. CIR
2. CIR had until July 17, 2006, the last day of the
120-day period, to decide Philexs claim
3. Since CIR did not act on the claim on or before
July 17, 2006, Philex had until Aug 17, 2006, the
last day of the 30-day period, to file its judicial
claim.
4. However, Philex filed its judicial claim only on
Oct 17, 2007, or 426 days after the last day of
filing; hence, the case is dismissed for LATE
FILING.
CIR v. MINDANAO II GEOTHERMAL PARTNERSHIP, GR
191498, Jan 2014

A. TWO-YEAR PRESCRIPTIVE PERIOD

1. It is only the administrative claim that must be filed
within the two-year period.
2. The proper reckoning date for the two-year period
is the close of the taxable quarter when the relevant
sales were made.
3. The only other rule is the Atlas ruling, which applied
only from June 8, 2007 to September 12, 2008. Atlas
states that the two-year period for filing of a claim for
refund should be counted from the date of filing of
the VAT return and payment of the tax.
CIR v. MINDANAO II GEOTHERMAL PARTNERSHIP, GR
191498, Jan 2014

B. 120+30 PRESCRIPTIVE PERIOD

1. The taxpayer can appeal in one of two ways: (a) file
a judicial appeal within 30 days after CIR denies the
claim within the 120-day period, or (b) file judicial
claim within 30 days from the expiration of the 120-
day period, if CIR does not act within the 120-day
period.
2. The 30-day period always applies, whether there is
denial or inaction on the part of the CIR.
3. As a general rule, the 30-day period is both
mandatory and jurisdiction. [NOTE: Chief Justice
dissented on retroactive application of mandatory and
jurisdictional nature of the 120+30-period].
CIR v. MINDANAO II GEOTHERMAL PARTNERSHIP, GR
191498, Jan 2014

4. As an exception to the general rule, premature

filing is allowed only if filed between Dec 10, 2003
and Oct 5, 2010, when BIR Ruling DA 489-03 was
still in force.
5. Late filing is absolutely prohibited, even during
the time when BIR Ruling DA 489-03 was in force.
SEC 109-114: ADMINISTRATIVE REQUIREMENTS

ADMINISTRATIVE REQUIREMENTS
REGISTRATION (Secs. 109(2), 112(B) & 236, NIRC)
INVOICING (Secs. 110, 113(A),(B) & (D), 237 & 238, NIRC)
BOOKKEEPING (Sec. 113, NIRC)
FILING OF TAX RETURN AND PAYMENT OF TAX (Sec. 114,
NIRC)
WITHHOLDING OF TAX (Sec. 114, NIRC)
POWER OF CIR TO SUSPEND BUSINESS OPERATIONS OF
TAXPAYER (Sec. 115, NIRC)
SECS 237 & 113: REGISTRATION AND
INVOICING REQUIREMENTS
S Compliance of the registration and invoicing
requirements are very important under the VAT law
Registration as a VAT person makes such person liable to VAT,
regardless of his gross sales or receipts for the year, except for
certain exempt transactions of said VAT-registered person
Only VAT-registered persons are entitled to credit input taxes against
their output tax.
Non-registration as a VAT person does not exempt him from VAT
liability on his taxable transaction, where he is a VAT-registrable
person
Issuance of VAT invoice or receipt on his VAT-exempt
transactions makes him liable to VAT as a penalty
For the buyer to be entitled to VAT input tax, the transaction
must be evidenced by a VAT invoice or receipt
SEC 113 & 237: INVOICING REQUIREMENTS
SEPARATE INVOICE OR RECEIPT
SUBJECT TO VAT
12%, beginning Feb 1, 2006 (REGULAR SALE, INCL. SALE TO GOVERNMENT), OR
0% (ZERO-RATED SALE)
EXEMPT FROM VAT: EXEMPTION MAY REFER TO A TRANSACTION OR
PERSON
AMOUNT RECEIVED IS NOT ITS INCOME OR FEE BUT FOR ANOTHER ENTITY
FOR REIMBURSEMENT OF ADVANCES
VAT-EXEMPT SALE
If VAT invoice or receipt is issued by a seller for a VAT-exempt transaction,
he is liable to VAT output tax as a penalty, but the buyer is entitled to claim
VAT input tax.
Separate invoices or receipts for VAT and non-VAT transactions may be
issued, provided that the term VAT EXEMPT or VAT ZERO-RATED shall
be written or printed prominently on the invoice or receipt.
COMBINED VAT AND NON-VAT INVOICE OR RECEIPT
BREAKDOWN OF SALES PRICE
CALCULATION OF VAT ON TAXABLE PORTION
SEC 113 & 237: INVOICING REQUIREMENTS

Use of single invoice/receipt involving VAT and

non-VAT transactions
The seller has the option to use a single invoice/
receipt, provided that the breakdown of the sales
price between taxable, exempt and zero-rated sales
and calculation of the VAT on each portion of the sale
is shown on the invoice/receipt.
For this purpose, the printed invoice/receipt must
reflect the taxable, exempt and zero-rated sales,
either in separate columns or separate rows (RMC 29-
2005 and RMC 62-2005).
SEC 114: FILING OF RETURN/PAYMENT OF TAX

Final Withholding Tax on Payments to Non-Resident

Person
Party required to withhold VAT is the payor, regardless of
whether or not he is VAT-registered. If it is a non-VAT
person, VAT becomes part of cost of asset or expense
VAT is passed on to the resident withholding agent
Payor shall claim input tax upon filing of its VAT return,
subject to allocation of input tax
Duly filed BIR Form 1600 is the proof or documentary
substantiation for the input tax
Withholding tax shall be remitted within 10 days following
the end of the month withholding was made
SEC 114: FILING OF RETURN/PAYMENT OF TAX

Final Withholding Tax on sales to government

Sale of coal to NPC by a holder of Coal Operating
Contract is exempt from final withholding VAT. RA
9337 neither expressly nor impliedly repealed PD 972.
A special law cannot be repealed, amended or altered
by a subsequent general law by mere implication.
The applicable provisions are Secs. 204 and 229,
NIRC, which gives the taxpayer a period of two years
from date of payment within which to file both its
administrative and judicial claims for refund (Semirara
Mining Corp v. CIR, CTA Case No. 7727, Feb 10, 2011).
 BUS TAX: VAT OR 3% PT

VAT 3% PERCENTAGE TAX

If lessor receives rental income Registered as a non-VAT
for residential houses per unit person and the reason for
per month of P10,000 or less, his exemption from VAT is
he is exempt from VAT even if that his gross sales or
his gross annual rental is more
receipts for the preceding
or less than P1.5 million
12 months do not exceed
(P1,919,500 beginning 2012).
P1.5 million (P1,919,500
Since the reason for VAT
beginning 2012).
exemption is Sec. 109(Q), he is
also exempt from 3% PT.
 BUS TAX: VAT OR 3% PT
VAT
If the lessor has commercial
stalls for lease and the amount
of gross rental for the year is
P1.5 M (P1,919,500 beginning
2012) or less, he is (a) exempt
from VAT if he did not register
as a VAT person, or (b) subject
to VAT if he registered as a VAT
person, or he issued a VAT
receipt for the rent income.
3% PERCENTAGE TAX
In (a), he is liable to the 3%
percentage tax because he
derives rental income and
the reason for his VAT
exemption is that he did not
exceed the annual
threshold of P1.5 million
(P1,919,500 beginning
2012).
In (b), he is liable to VAT.