VALUE ADDED TAX (VAT)

1. Compensation – NO VAT component bakit kasi kapag ikaw ay may Er-Ee relationship you are not selling service,
you are doing your service and what you receive is compensation.

Ex. Sale of service pursuant to Er-Ee relationship is an exempt transaction (Sec. 109) (i) NIT lang ang tax.
Walang VAT.

Pero pwede kang buyer. You are not a seller. If you’re a purely compensation income earner, ang
ginagastos mo, you are just a spender amd you are just a buyer. So every time that you buy, the seller adds the tax
to the value. What you pay for is with a VAT component but you are not liable for VAT.

2. Business – there is VAT because you buy and sell

3. Profession – exercise of profession without Er-Ee relationship, you sell service

Ex. Law office
4.
a. Compensation (1) + Business (2) = VAT lang sa 2 because you are selling pero sa 1 you are just a buyer
b. Compensation (1) + Profession (3) = VAT sa 3 because you are selling pero sa 1 you are just a mere
buyer
c. Business (2) + Profession (3) = may VAT because you are selling both service and goods
d. 1 + 2 + 3 = sa 1 lang NO VAT.
5. Business/Corporation – a corporation engaged in trade or business is selling or buying

Ex.
Coke
(1)I might be selling the finished product and I sell the same finished product (trading) or (2) I am the
producer and seller. As producer, I buy the ingredients and have a factory in Laguna, process the raw materials that
I bought. I produce and I sell. This is sale of service and sale of goods. Bawat benta ko is tax added to the value.
Sa 2 situations, I still buy and sell. You cannot sell without buying. Because I buy, there is another seller.

Ex.

(1)
Trading. Finished product to finished product. Seller ka binili ko yung coke ng P100. Because the VAT is at
12%, tax of 12 is added to the value. So I will pay you P112. As a seller, you call the P12 as output. I the buyer call it
input.
Kahit na I just drink the coke, I bear the burden of P12. The transaction is stopped because I already
consummated it. But as a seller, you have an output.

Purchase/Expense Side: 7-11 (sale of goods)

Paano kung hindiko ininom. Dinala ko sa grocery store ko (sale of goods) na 7-11.
P100 na coke ang binili ko. Ang bawat isa ay P100. P10, 000. VAT ko ay x 12%. P1, 200. Ang binyad ko ay
P11, 200. I call this input (buyer). You call this output (seller).

Ibebenta ko yung 100 cokes sa 7-11 store. So I rent from Mr. A. Rent is 5k.Since buyer ako ng lease ang
binayad k okay lessor Mr. A ay 5k + 12% = P5,600. Ang tawag ko as buyer is input. Si lessor ang tawag sa 600 ay
output.

Kuryente. 1k +12% = P1,120. Ang tawag ko sa 120 ay input. Ang tawag ni MERALCO ay output.

Meron akong 2 employees. MWE.4k each. Dahil Er-Ee relationship, NO VAT. No input and output.

Revenue Side:
Considering all the expenses, P180 na ang bawat coke. Yan ang bentahan ko.

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 Bumili kayo ng 60 na P180 coke. P10,800. Bawat isang coke na binili niyo ay may 12. So P180 x 12%= P21.6.
21.6 x 60 = P1,296 VAT. Ang tawag ko sa 12 ay output (seller). Ang tawag naming ay input (buyer).

VAT Formula:
Output – Input

 If more than the output – excess output VAT: (maraming benta kesa pinamili kaya saincome tax
side ikaw ay may income kaya bayad ka ng income tax) bayaran sa BIR dahil VAT payable ka
 If more than the input – excess input VAT: (lugi kaya income tax ay 0 tax) credit:
o by crediting the excess input VAT against your output VAT for succeeding quarters or
o you may credit your output VAT against other tax liabilities

*This table is not applicable if you are a compensation income earner. This table is
applicable to only to person engaged in trade or business.

INCOME TAX VAT

Revenue side Sales
Output Tax

NIT If output is more than the input – pay NIT

and VAT

Expense side: Input Tax

Cost of good/sales + EITLBDCPR as ID

NO income Tax If input (expense) is more than the

revenue, NO VAT because you are
operating at a loss. Therefore, credit.
Then you will arrive with your Net Taxable
Income (NIT):
 NIT
 8% - if gross sales do not exceed
3M under TRAIN Law

Exercise of Profession: no. 4 b (1+3) Compensation and Profession Law office (sale of service)

Employee ako. Yung aking income sa compensation ay wag niyong pakialaman dahil monthy ay may
withholding ang tax due ay NIT. Pero yung income ko sa akinglaw office ang aking binebenta ay service. So kayong 3
clients ko at nagbayd kayo ng acceptance fees: 500k, 600k and 800k. Registered ako for VAT. Kapag binayaran mo
ako ng 100k , ang ibabayad mo sa akin ay 112k so on and so forth. Ang tawag ko sa 12 mo ay output at ang tawag
mo as cliente ko ay input.

Nagbabayad ako ng renta sa opisina. Ako ay nagbabayad kay lessor ng 20k monthly x12%= P22,400. Ang
tawag ko sa 2.4k ay input at tawag ni lessor ay output.

Nagbabayad ako ng kuryente. 5k x 12% = P5,600. ANg 600 ang tawag ni Meralco ay output. Ako tawag ko
ay input.
Nagbabayad ako ng internet. 1kx 12% = P1,120. Ang tawag ko ay input. Tawag ni PLDT sa 120 ay ouput.

Income Tax Side:

I am engaged in trade or business. My income from exercise of profession does not exceed 3M. Then, I
have the option to be taxed at 8% or NIT.
600k ang kinita ko sa 1 taon, which does not exceed 3M VAT, exempted ako sa VAT (Sec. 109 (BB).
If I choose 8%, no VAT.

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 If the gross sales/receipts exceed 3M, individual taxpayer on the income tax side has no choice but to be
taxed at NIT.
So let us assume that these are may sales in the law office which do not exceed 3M. Let us assume that my
7-11 store, the gross sales do not exceed 3M.

Ang binenta ko ay 600k. Ang gastos ko ay 20k renta, 5k kuryente at 1k internet= 26k. 600k-26k= 574k.
If 8%, NO VAT. 8% of 250k, 600k-250k= 350k. So 8% of 350k = 28k. Kalimutan mo si 26k kasi nag8% ako. Gross after
250k.

VAT Side
Vat exempt ako so dapat hindi ako nagimpose ng 12% VAT.

Hindi ko pwedeng sabihin sa MERALCO, internet at lessor na huyy VAT exempt ako wag mo ko icharge ng
12%. I cannot refuse the payment of 12%. The payment of 12% because I chose 8% will have nothing to do with
me. Wala na yun kasi namili na ako ng 8%. Because I choose 8%, that takes the place of income tax , percentage tax
and VAT.

If I chose NIT as may tax due, I am still exempt from VAT because I did not breach the 3M threshold. Hindi
rin ako pwede mag-impose ng 12%. Kita ko is 600k – 26 k gastos= 574k-250k=324k. 324k is my NIT.

Dahil exempted ako sa VAT, I still cannot refuse the payment of 12%.

Let us assume that my 7-11 store exceed the gross sales at ang kinita ko sa law office ay 4M.lagpas
threshold. I should have registered for VAT purposes. Every taxpayer engaged in trade or business 2, 3, 4, 5 should
have registered with the BIR and a certificate of registration is issued. Nakasulat doon kung anong klaseng tax ang
babayaran mo. Because of the TRAIN Law, yung dating certificate of registration na registered ka for VAT kasi ang
threshold sa VAT ay 1,919,500 so there’s a possibility na noong isang taon vatable ka kapag dating ng January 1,
2.5M exempted ka na ngayon. So you should have requested for the amendment of the certificate of registration
para tanggalin yung nakasulat dun na VAT registered. Akapg hindi natanggal, kailangan mong mag-impose ng VAT at
mag-output input. The deadline is April 30, 2018 (extended) for the amendment of the Certificate of Registration
(COR).

So 4M ang sales ko. Hindi ako pwedeng mag-8%. Ang tax due ko ay NIT. Doon sa aking law office, 4M –
EITLBDCPR which is let us say 26k = 3. 974M tapos multiply mo ng rates yan ang income tax mo. Dahil sa income tax
nagbyad ako ng buwis pagdating sa bar? Marami kang nabenta kesa napamili. So output ko ay 72k.

Summary:
8% (below threshold of 3M) No VAT, Exempted but lahat ng sales ko hindi ako
pwdeng magimpose ng 12% VAT
NIT (beyond 3M) I am required to register fro VAT at magimpose ng 12%
Every taxpayer engaged in trade or business Will have to bear the burden of the 12% whether you
are on the buyer’s side or seller’s side

(2)
Q: Ano ang 2 na may output ka?
A: Atty. Ang resibo.
Resibo:
Coke 100
Subtotal: P100
Amount due:
Net Vatable Sales: P100
VAT: P12
VAT Exempt Sales: 0
VAT Exemption: 0
Zero Rates Sales: 0

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Q: What is the importance of the receipt for tax and income purposes?
A: Receipt is a proof that you spent.
Income Tax Side VAT Side
Receipt means you purchase.At dahil ikaw ay namili,
ikaw ay gumastos. Kaya yung resibo nakareflect sa
expense side sa EITLBDCPR.

Kapag ikaw ang may hawak ng counterpart ng resibo, Output side kapag hawak ng seller yung resibo.
seller side ka. Kaya yung resibo mo ay nasa revenue
side sa income tax.

When you file your ITR, that receipt representing your sales to me should have been reflected in your ITR.
That sale/purchase sa akin which is a sale to you should have been refelected by me sa income tax side, expense
side. For VAT purposes, sayo that receipt should have reflected in your output and should have been reflected in
my input.
If our ITRs and VAT returns do not match, something is going on between you and me. BIR can easily
detect because it is automated. Kasi isang pindutan lang malalaman lahat ng inissuehan mo ng resibo. At kapag
yung resibong yun crinoss-match sa lahat ng pinagbentahan mo. Isang pindot lang malalaman kung totoo kang
nagbenta at ako ay totoong bumili. If these 2 do not match, the you are doing something wrong.
Very important in the receipt is the TIN number.

3 Transactions in VAT:
Tax is added to the value. This is what we refer to as “Transactional Tax”. Indirect tax.

- Value added on: o

sale of goods
o sale of service; and
o importation of goods
- Indirect tax

NOTE:

1. Sale of goods – must be in connection with trade or business

2. Sale of service – must be in connection with trade or business.
3. Importation of goods – may or may not be in connection with trade or business. Yung 5
pwedeng mag-import kasi per transactional basis. Bawat isang benta. Bawat isang
importation.

Lahat ng 5 kapag ikaw ay nagbebenta, sell and buy. Sale e. The point of view is both on the seller
and the buyer’s side. The tax is added to the value. Every time that you sell, the tax is added to the
value. Every time that you import, the tax is added to the value.

So even if you import for personal consumption pagdating ng goods sa Bureau of Customs (BOC) warehouse,
automatic VAT ang i-impose. And when you sell let us say nag-import ka, VAT ‘yun.

Whether kainin mo or ibenta mo ulit. Pag kinain mo, wala ka ng VAT, pero pag binenta mo, may VAT ulit, kasi
ang VAT ay each per transaction.

Bawat benta ng goods in the course of trade or business

Bawat benta ng service in the course of trade or business VAT is imposed
Bawat importation whether in the course of trade or business

12% - regular rate of tax imposed on the:

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 1. Gross selling price - in the case of goods;
2. Gross receipts - in the case of service; and
3. Total value used by the BOC in determining the tariff and customs duties including the excise
taxes in the case of importation. The BOC will determine the amount based on the historical data.

Kapag dumating ang goods sa Pilipinas, meron tayong tinatawag na dutiable value.

‘Yung BOC meron yan books, meron silang historical cost, meron silang dutiable value of goods.

So pag ang in-import mo electric fan hindi tinatanong kung anong brand kasi historically, ung ini-
import natin nakalista yan so alam nila ung valuation regardless of declared value. Kaya ung mga
importers nagde-declare ng value madalas undervaluation. So hindi pwedeng maging basehan
un.
 Dutiable value is the amount determined by the BOC as basis of 12 % VAT, including
excise taxes.

Excise taxes

- Imposed on importation and manufacture of goods.

- So pagdating ng goods mo dito, ‘yan mag-import BOC warehouse, automatic ini-
impose agad diyan tatlo:
1. Tariff and Customs Duties (TCD)
a. Regular
b. Special – these are the dumping duties, marking duties. If the
importation will damage local manufacturing industry, the DTI or
the Department of Agriculture will impose special tariff and customs
duties.
2. VAT
3. Excise Tax

So tatlo agad. Posibleng apat, dalawang klase ng TCD, VAT and excise tax unless the law
exempts. Automatic yan.

So pag dumating ang goods hindi ka nagbayad ng tariff and customs duties, ng VAT, ang goods
mananatili sa warehouse, hindi mo mailalabas yan. Hindi mo makikita.

If you want to protest or question the tariff and customs duties, the VAT and everything else,
you pay under protest. Without payment, the goods will remain.

So ikaw na importer because you need the return of your value of money used in the
importation, magbayad ka.

NOTE: Only after payment will the goods be allowed exit from the BOC warehouse.

Kaya diyan mabilisan. Kung ang income tax isang beses lang binabayaran sa isang taon, dito
bawat importation bayad ka. And the assumption is you do not import for personal
consumption, very limited yun. You import for trade or business but it doesn’t mean that VAT
will not be imposed if the goods are imported for your personal consumption. Whether trade
or business or not, VAT will be imposed.

Goods

- Tangible and intangible objects which are capable of pecuniary estimation. Even real properties are
considered goods.

Sale

- Transfer of ownership with payment of compensation.

Transactions Deemed Sale (TDS)

- There is no sale to speak of but the goods are sold and VAT is imposed.

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 1. 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;
2. Distribution or transfer to shareholders or investors as share in the profits of the VAT registered
persons;
3. Distribution or transfer to creditors in payment of debt;
4. Consignment of goods if actual sale is not made within sixty (60) days following the date such goods
were consigned; and
5. Retirement from or cessation of business, with respect to inventories of taxable goods existing as of
such retirement or cessation.

Sale of goods, may seller, may buyer. Ang pagbebenta ni seller must be in the course of business.

- VAT is business tax so ‘pag ikaw ay empleyado lang, wala ka niyan.

- Kung wala kang business, wala ka niyan. Taga-bili ka lang, tawag sa iyo consumer so hindi ka nagi-
impose ng VAT kasi ikaw ay taga-kain.
- Pero kung ikaw ay taga-kain at ang binilhan mo ay engaged sa trade or business ay di ‘yung
nagbebenta sa’yo ay maglalagay 12% tax added to the value.

Take the case of McDo. Si seller nagbenta kay buyer, sabi sa TDS, walang sale, walang bayaran.

1. Tansfer, 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.

Ikaw si seller may-ari ka ng McDo, nagbenta ka ng burger P100 each. When is it deemed sold when
there is no sale? Kunwari, Mr. DL, may-ari ka ng Mcdo, all the burgers are intended for sale to customers.
Nagutom ka, kinain mo.
o Sold, 12% VAT. Nakalista sa sales mo nagbenta ka ng burger kahit wala kang binayad.
o Bakit?
 You consumed the burger originally intended for sale.
2. In payment of creditors.
Mr. Pokerface may utang ka dito 1 Million ginamit mo sa prangkisa mo ng McDo. Wala kang pambayad,
interest 10%, 1.1 million. Due date arrives wala kang 1.1 million. So you told the creditor, can you just
eat McDo for 1.1 million? Kasi sayang kesa wala kang matanggap na pera i-consume natin. Lahat ng
Mcdo burgers na kinain mo in payment of that loan.
o Deemed sold by McDo
3. In payment of investors (same with in payment of creditors)
May nag-invest sa business mo ng McDo. Wala kang pambayad na return na cash. Anong gagawin mo?
Pwede ho ba na lahat ng burgers ng Mcdo kainin na lang ninyo?
o So everyday dadating siya sa McDo, 1 burger, 1 burger, nililista yun ng cash register as if may
natanggap na salapi because for purposes of sales, that is considered sold and that is TDS.
That is the meaning of it.
4. Consignment of goods not sold within the agreed date of consignment or 60 days after date of
consignment.
‘Yung bakery, ikaw mautak ka, franchise. ‘Pag ikaw ay bumili ng supplies puhunan agad yun so sabi ko
‘di ako bibili ng tinapay pwede ho ba bakery ikaw magconsign? Mautak ako eh, nabubuhay ang negosyo
ko nang di naglalabas ng salapi. Consignment kung ilan madeliver mo ilan mabenta ko, sold. Eh ‘di ko
nabebenta 60 days na, may amag na ‘di pa nabebenta.
o So ‘pag ‘di nabenta si tinapay from date of consignment to the end of consignment, all of
those tinapays are deemed sold from the point of view of the consignor.

NOTE: If McDo sells it eventually and that’s another VAT, actual sale ‘yun.

5. Closure or cessation of business as far as all the stocks and inventory are concerned.
Sabi mo paggising mo pagod na pagod na ako. Ayoko na ng McDo, ayoko na magbusiness. Isara na ang
McDo. Noong sinara mo, meron laman ang ref, 1000 pieces patty, meron ka pang mayonnaise,
ketchup, tinapay, mantika, may French fries ka pa, nandun sa ref lahat. Ang gagawin ng BIR bibilangin.
Ilan burgers ang nagagawa ng patty na yan?
o Kapag sinara mo ang business mo lahat ng yan deemed sold kahit hindi nabenta. Yan ang
tinatawag na TDS.
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Why does the law provide for these transactions deemed sale?
- Kasi sa business, these are the easiest ways or means of evading payment of tax by reducing the gross
sales by making it appear that all the goods are consigned, that all the goods have been consumed
pero walang ibinayad. Pwede yan, walang issue. Kung gusto niyong ipakain ng ipakain ng libre okay
fine. But for purposes of VAT and income tax hindi yan magbabago. For purposes of VAT, the burgers
sold may corresponding side ‘yan ng income tax kasi part ka ng gross sales niyo which will form part
of the gross income for income tax purposes. So lagi yan magkaganyan. Bawat benta niyo may
corresponding income tax side. Remember, ‘yung income tax,’ yung net income tax.

NOTE: Gross income – allowable deductions = Taxable net income x Rate

Lahat ng benta niyo dito ito ‘yun. Lahat ng importations niyo will form part of your inventory which will be
sold to the public while you are engaged in trade or business. That is why ‘pag tinignan niyo yang VAT return,
monthly, ‘di ba ang nakadeclare lang dito VATable sales, receipts, ‘yan ‘yung nakabreak down. Sinusulat mo
kada end of the month kung magkano gross sales or gross receipts at magkano yung output VAT.

Ano mga entries dito? Of course your TIN number pinakaimportante kasi yan ay unique.

TIN Number

- Ang BIR computerized, pag in-input lang ang TIN lalabas lahat ng binenta at binili mo because of
the official receipt structure.

How is that captured?

o Whenever you buy or whenever you sell, there’s a withholding tax. That is the beauty of
withholding tax system because the withholding tax system parang record yan, binayaran yan
sa inyo, ti-nong kayo, and number 1 requirement sinong nagtong at sinong tinong?
o ‘Yun ay nakalagay agad using the TIN number. So isang pindutan lang ng BIR lahat ng
transactions mo na sinubject sa withholding tax lalabas agad.
o ‘Pag ikaw naman ay nagbenta siyempre meron ‘yun counterpart na buyer.
o ‘Yung buyer withholding tax agent. Pag pinindot ni BIR yang si TIN number ni seller o ni buyer,
magkakakitaan.
 That is what we call cross matching.
- Kaya itong form na ito hindi pwedeng baguhin kasi sa BIR computer system kina-capture agad yan.
The system captures the data and it goes in the fields. Meron silang sales, transactions, purchase
transactions so kitang-kita.
- Now this one, VAT ang unang nakalagay diyan ay gross receipts per month ito so lahat ng sales mo
sa isang buwan nakalagay, sale of goods, sale of service. Meron nakalagay dito zero-rated, exempt
transactions.
- ‘Dun muna tayo sa simpleng sales, so pag ikaw ay nagbenta ikaw ay nag-inpose ng 12%, ang tawag
sa 12% ay output. Pag ikaw ay bumili at nagbayad ka ng 12% ang tawag doon ay input.

INPUT and OUTPUT Tax

Input Output
refers to the value added tax paid on purchases refers to the value added tax paid on sales

Take the case of McDo, Ako ang may-ari ng McDo, bumili kayo lahat ng burgers, kinain niyo.

 Ang tawag ko sa P12.00 = output

 Ang tawag niyo sa P12.00 = input

NOTE: Parehong P12.00 ang pinag-uusapan. Same 12%. We call it differently. I call it output, you call it
inpupt.

FORMULA IN VAT = OUTPUT – INPUT

 If it results to excess output = VAT payable (Bayaran mo sa BIR)

 If it results in excess input = Ask for refund or credit (Sobra ang binayaran mo)

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 NOTE: Sa isang buwan, grupohin mo dito lahat ng sales, grupohin mo ‘yung purchases, kunin mo ‘yung
component ng 12% = ang tawag mo dito ay OUTPUT

NOTE: Kunin mo ‘yung component ng 12% sa pinamili mo = ang tawag doon ay

INPUT OUTPUT LESS INPUT

A. If you have more sales than purchases, may tubo ka.

 Pay income tax

 Pay VAT

NOTE: If you result in excess ouput = marami kang nabenta kaysa pinamili kaya ikaw ay tumubo. Dahil
tumubo ka, ang gobyerno dapat kumita sa’yo. Dalawang klase:

1. VAT payable; and

2. Income Tax

B. If you have more purchases than sales, lugi ka. If you have more input than output, lugi ka.. Dahil lugi ka,
marami kang binayad na 12%, sobra ang binayad mo.

 Refund or credit.
 No income = No income tax due for that particular period.
 To elucidate: Kapag ikaw ay maraming binili kaysa binenta, ang tawag sa’yo lugi o wala. Sobra ang
binayad mong 12% kaya sabi ng gobyerno, “Kawawa ka naman.” Parefund tayo or pacredit ‘nung
excess input VAT. At the same time, “I will not ask you to pay income tax because lugi ka, wala ka
ngang income.”

Every month, you do it this way. Include gross receipts, gross sales, VAT paid. Suma total, sa dulo; either VAT
payable or excess input.

 ‘Yan monthly sinasubmit. Ibig sabihin, BIR is monthly monitoring your sales (pati quarterly returns).

A. Monthly: January, February, March.

B. Quarterly: March (covering January, February, and March), June (covering April, May and June). Hanggang
sa dulo ng taon. Ang counterpart niya sa income tax kapag kinompare niyo ‘yan ang returns. If you’re engaged
in trade or business, ito ‘yung VAT returns mo:

VAT (Monthly) Engaged in Trade or

Business
January
February
Q1 March Q1 This should match
April
May
Q2 June Q2 This should match
July
August
Q3 September Q3 This should match
October
November
Q4 December Q4 This should match

You have 12 months. If you are engaged in trade or business, you are subject to VAT.

Dito, tao or korporasyon, ang returns mo ay quarterly (Q1, Q2, Q3, and the final consolidated return including
Q4).

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NOTE: If there is a discrepancy in the gross sales that you declared, either here or there, you are doing
something wrong. That is why BIR knows exactly how much income tax due will be paid by you even if you
have not filed the final consolidated return which is filed:

 If calendar year = April 15, the following year.

 If fiscal year = On the 15th of the 4th month following the close of the fiscal year.

So you can see the connection between the two. Lahat ng benta mo, bawat benta in the course of trade or
business will have an effect on your income tax kasi your income is derived from trade or business.

What happens to you if you are just a plain consumer (eg. Taga-kain sa restaurant, taga-inom ng kape sa McDo
o Starbucks, taga-bili ng libro, taga-bili ng damit)?

 We buy consumer goods from those who are engaged in trade or business. And they pay the
additional 12%. So what happens to your 12%? You have an input of 12%.

Uminom ka ng kape sa Starbucks, P100.00. P112.00 babayaran mo. So sabi mo tuwang-tuwa ka, “May input VAT
ako na P12.00. Ang Starbucks may output na P12.00.” Sabi mo ngayon, “Pwede ba ako mag-output less input?”
Eh ‘di wala akong output less ang dami mong input = excess input. Pwede ba kayo?

 Hindi, the only taxpayers allowed to use this (output less input) are those engaged in trade or
business.
 Kung kayo taga-kain, o consumers lang, you bear the impact in full of the 12% VAT. That’s the rule.
Kaya ‘di ba, nagrereklamo tayo, “Ang taas-taas naman ng VAT na ‘yan.”

History of VAT:

 Dati ‘yan kasi 10%, sales tax. Noong unang panahon, sales tax ang tawag dyan tapos ginawang VAT na
10% tapos naging 12% ang increase.
 So kaya ‘yan tinatawag na sales tax dahil tax ‘yan habang nagbebenta ka.
 If you are not engaged in trade or business, you cannot impose the 12% tax added to the value.
 If you’re a buyer whether engaged in trade or business or not, you bear the burden of 12%. The only
difference is if you’re also selling goods, your input VAT will have importance.
 Cory Aquino Administration. 1997.

McDo, ako. Bumili ka ng isa. Siazon, bayad ka sa’kin ng P112.00. Kinain mo. Si P12.00, kinain mo.

 Wala nang effect sa’yo. Consumer ka lang eh.

Pero si Siazon matalino, business-minded, alam niyang may nagugutom tuwing Tax 2. Every 5:00 pm bibili siya
ng McDonald’s. Bibili siya ng 40 na McDo, P112.00 each. So merong siyang input na P12.00. Eh dahil kayo, dahil
tinatamad kayong pumila doon, siya ngayon ang nagnenegosyo, bumili siya ng 40. Ang benta niya sa inyo
P150.00. Kayo naman dahil ayaw niyong pumila, bumili kayo kay Siazon. Pero si Siazon, registered dapat, in
trade or business.

 Kung wala siyang registration, hindi siya pwede niyan.

So si Siazon, registered, engaged in trade or business. Buy and sell of McDonald’s burgers. Binebentahan ko kayo
P150.00. Bili ka P150.00. Ang 12% ng P150.00, P18.00. Bayad ka sa kanya, P150.00 + P18.00 = P168.00.

 Ang tawag ni Siazon sa P18.00 ay output.

 Ang tawag niyo sa P18.00 ay input.

Kapag tiningnan natin si Siazon, meron siyang output na P18 minus input niya ng P12.00, equal P6.00, excess
output tax. So pumunta si Siazon sa BIR, nilagay niya sa form, gross sales ? VAT, P8.00. Input VAT P12.00, Output
VAT P18.00. P18.00 – P12.00 = P6.00.

 Excess output VAT = bayad ng VAT.

 Pero kung kinain niya lang ‘yan, wala siyang output less input, hindi siya pwede magfill out ng form.

9
SALE OF SERVICE

Service

 Legitimate only.
 eg. accounting services, legal services, medical services, security agencies, secretarial work, any other
kind of service.
 as long as the sale is sold in the course of trade or business, VAT will be imposed

Saan iniimpose?

 Sa Gross Receipts. Parehas lang ‘yan. Parehong gross receipts. Parang apply, ‘yung isa green at ‘yung
isa red. Pero parehong ibig sabihin ‘dun sa consideration.
 Kapag sale of service = gross receipts ang tawag.
 Kapag sale of goods = gross selling price ang tawag.

Pero pareho lang ‘yan, ‘yung consideration. ‘Yung isa nga lang green apply at ‘yung isa red apple.

NOTE: In sale of service, wala tayong “Transactions deemed sale.” It’s either you rendered service or you did
not. Meron lang tayong “Transactions deemed sale” sa sale of goods because may mga goods na nacconsume
pero sa service wala ‘yan.

Recall income tax. The items of gross income under Sec. 32:

Sec. 32. Gross Income –

(A) General Definition. - Except when otherwise provided in this Title, gross income means all
income derived from whatever source, including (but not limited to) the following items:

1) Compensation for services in whatever form paid, including, but not limited to fees,
salaries, wages, commissions, and similar items;
2) Gross income derived from the conduct of trade or business or the exercise of a
profession;
xxx

1. Compensation for services in whatever form paid, including, but not limited to fees, salaries, wages,
commissions, and similar items;

 Tax imposed: income tax only.

 No VAT because ER-EE Relationship exists.

2. Gross income derived from the conduct of trade or business or the exercise of a profession

 Tax/es imposed:
a. Income Tax
b. VAT

10
  If you realized income because you are selling service from the exercise of your profession, meaning
there is no EER, you are still subject to income tax, but in addition we impose the VAT of 12%.

NOTE: But when you are rendering service and you get compensation because of an EER, ang tax
component mo lamang ay income tax without VAT. VAT pertains to sale of service in the course of trade or
business, exercise of profession without EER.

Ako, si Lumbera, meron akong law office. Lahat ng kliyente ko na nagbabayad sa akin, sale of service ‘yun.
Everytime that I sell my legal services, I will impose 12% VAT in my clients.

 12%, ang tawag ng mga kliyente ko ay input tax,

 12% ang tawag ko ay output tax.

Kung ang kliyente ay korporasyon:

 Client coporation has input of 12%

 Client corporation selling goods, eh ‘di ‘yung input sa akin na 12% na binayad sa’kin iccredit niya sa
lahat ng sales niya.

Output-input, output-input, output-input.

NOTE: Receipts of restaurants show no VAT because it is exempt under Section 109 of NIRC.

Lahat ng resibo may breakdown. Iba ‘yung official receipts ng BIR. The one registered is the cash register and
we call it POS (Point of sales) machines.

 Nakasulat dyan kung magkano gross selling price, 12% VAT, 0% VAT, Exempt. Lahat dapat ‘yan nasa
resibo.
a. If VATable, ‘yung 12% nandun sa 12% VAT.
b. If zero-rated, meron ding entry doon.
c. If exempt from VAT, meron ding entry doon.

NOTE: Tandaan ninyo, ang resibo ang pinakaimportanteng proof ng sale and purchase. Without the
receipts, you cannot claim your input. This is the most important proof.

Kung ikaw Mr. Siazon, ‘yung resibo mo ng pagbili ng McDonald’s na 40 pieces of hamburgers

 That is the best proof that you pair the output tax, the 12% VAT which you consider as your input
VAT.

Paano kung nagbenta sa inyo ng walang resibo si Mr. Siazon.

- Input cannot be credited against output.

- Mr. Siazon should be registered in trade or business and should be issuing official receipts showing
that you bought P150 pesos worth of hamburger + 12% VAT.
- Kapag si Mr. Siazon binitbit lang si 40 hamburgers at ibinenta sa inyo ng walang resibo:
o Output of Mr. Siazon = zero.
o Consumer’s ouput = zero o
Consumer’s input = P12.00.

Pero kapani-paniwala ba na si Mr. Siazon ay hindi nag-issue ng resibo?

- Hindi. Kasi siya ay required ng BIR na mag-issue ng resibo sa bawat benta.

NOTE: Kapag siya ay hindi nag-issue ng resibo, criminal case ‘yan.

Pwede ba siyang hindi mag-issue ng resibo?

- Oo, kung ayaw mo.

- Ano ang effect sa kanyang VAT?
o Zero output, less input is equal to? Magpapacredit ka Mr. Siazon. Swerte mo naman, tama ba?

11
 NOTE: Pero hindi kapani-paniwala na si Mr. Siazon ay hindi nag-issue ng resibo. Anong ginawa niya sa
burger, kinain? This is the mindset of BIR.

If you were the BIR, looking at Mr. Siazon, “’Wag mo na ngang ideclare ‘tong binenta ko.” Pwede, gawin mo, okay
lang. Pero siya, registered siya as a BIR registered engaged in trade or business. Meron siyang resibo. Titingnan
ng BIR “Uy, hindi ka nga nag-issue ng resibo ibig sabihin wala kang benta. Acceptable ‘yun. Pero nasaan ang
burger Mr. Siazon?”

- Ang katapat ng resibo, burger. So ang bawat resibo minus. Wala kang resibo. Ibig sabihin ang burger
nandyan 40. Bigay mo nga sa’kin ang 40 mong burgers.
- If you cannot explain, meaning it’s not in your inventory or stocks, BIR says everything is sold. “Mr.
Siazon, everything is sold and you cannot credit your output because you don’t have receipt.”
- Ano mangyayari sa input mo?
o No effect on you. Wala ring effect sa’yo. Lugi ka. Pero you have to declare everything as sold.
All the 40 burgers despite the fact na wala kang resibo because the burgers are missing.
Burgers are deemed sold + 12%. Ang 12% galing sa sarili mong bulsa. When this happens,
BIR will presume that everything is sold and there is nobody who will shoulder the 12% and
therefore you should shoulder the 12%.

*Rentals, parlor(sale of service) – ordinary assets primarily for lease to customers

Law office (sale of service) – ordinary asset used in trade or business but not primarily for sale/lease to
customers

Q: Law office binenta ko vatable?

A: No. Sec. 109 P. It is exempted.

Even real properties are considered as goods (sale of goods)

Here is a subdivision lot, real estate developer or buy or sell of real properties. Sinubdivide ko ang mga lote, at
ibinebenta ko sa inyo. These are considered ordinary assets primarily fors sale to customers.

- Under regular circumstances, all of the real properties are considered as goods.
- When I sold each one to consumers, it is a VATable transaction.

Kapag ibinenta ko ito, may CGT ba?

o None. Because ang CGT ay inaapply lang if ang asset mo ay capital. This one, the real
properties are ordinary assets.

NOTE: Therefore the first conclusion is: When you are selling capital assets, VAT is not imposed.
VAT and CGT cannot go together because the assets are different.

 For CGT = you are selling capital assets

 For VAT = you are selling ordinary assets.
Not all sales of ordinary assets are subject to VAT. There are assets which are considered ordinary but
when you sell them they are not subject to VAT under Sec. 109.

Ex.
I am leasing from 7-11. Si Mr. A ang lessor. Kapag binenta sa akin ni Mr. A ang lease, VATABLE
ang lease kasi that is sale of service.
Kapag binenta ni Mr. A yung space sa akin yung lot and building na dati kong nirerentahan,
VATABLE. Ang tawag ni Mr. A sa building ay ordinary asset primarily held for lease to customers
(Sec.39)

NOTE:

 If real properties are capital assets, then CGT will be imposed but VAT will not be imposed.
 If the real property is an ordinary asset of the taxpayer (used in trade or business), then meron
kayong VAT na iimpose.

If you are engaged in trade or business, everytime na magbenta ka ng goods or service, impose 12%, seller
side you call it output, buyer side you call it input.

12
  If the buyer is a plain consumer, disregard the impact, you bear the burden of the 12% input VAT.
 If the buyer is also engaged in trade or business, then the input VAT can be credited against his output
VAT from all his sales. It goes that way all the time. All the gross sales per month shall be declared in
accordance with this manner which coincides as well with your income tax return as quarterly
returns because you are engaged in trade or business. So match an match ‘yan

On the expense side, remember, gross income less allowable deductions.

If you are engaged in trade or business, what are the deductions that you are entitled to claim?

 Individual: PE, AE, Itemized or OSD

 Corporation: Itemized or OSD

‘Yung itemized: expenses, interests, taxes, losses, bad debts, depreciation, etc.

NOTE: Among them, ‘yung necessary business expenses, you are buying from suppliers and therefore when
your expenses are declared as expenses from gross income, those same expenses should also reflect the
corresponding input VAT or your purchases.

So si Mr. Siazon engaged in retail of hamburgers, buy and sell of hamburgers. What are the expenses of Mr.
Siazon for income tax purposes?

1. Gasoline;
2. Telephone Expense; and
3. Utilities

Nakareflect sa income tax side. Nakareflect as input VAT for VAT purposes because those are purchases
of Mr. Siazon.

NOTE: ‘Pag ‘yan ay hindi nakita ng BIR na matching expense side from income tax at 12% input VAT,
patay kayo, parehas kayong iaassess: Deficiency income tax and deficiency VAT. Dapat ‘yan match,
income tax and VAT side. Kapag hindi nagmatch, tigok kayo sa BIR.

ZERO-RATED AND EXEMPT TRANSACTIONS

- Lahat ng resibo dapat may provision ng zero-rate at exempt.

NOTE: The sale of the books, is one of the exempt transactions under Section 109. We do not impose VAT.

Distinction between Zero-rated

1. Zero –rated:

- 100 x zero % = zero tax

- Applicable to:
1. Section 106 (sale of goods); and
2. Section 108 (sale of service)

NOTE: No zero-rated in importation.

2. Exempt:

- No VAT.

Zero-rated Exempt
Transaction not subject to VAT in all stages; Transaction not subject to VAT only at a particular
No VAT at all stages. stage as provided by law.

Input VAT is allowed to be credited against output Input VAT not allowed to be credited against output
VAT. VAT.

1. Section 106 (sale of goods); and

13
 2. Section 108 (sale of service)

In zero-rated transactions, input VAT is allowed to be credited against output VAT

- Beneficial to the taxpayer, if the input tax is allowed to be credited.

What is the reason why the law allows the crediting of the input against the output in case of zero-rated?

- Tignan ninyo yung zero-rated sa sale of goods (Sec 106) at yung sale of service (Sec 108).
o Sa sale of goods, number one sa listahan ay export sales.
 ‘Pag importation = 12%.
 ‘Pag palabas naman ng Pilipinas which is export = 0%, provided that the selling price
or the consideration for the export sale is coursed through the BSP or the banking
system of the Philippines.
What are the advantages of export sales over an import sale?
- Of course it is more advantages to the Philippines.
- When we do export sales, we promote locally manufactured products and we increase our foreign
currency reserves, as far as the BSP is concerned. So happy ang gobyerno.
o Importation is the opposite. There are two disadvantages:
1. Nagcocompete sa local products; and
2. Nababawasan ang ating foreign currency kasi ang binabayad natin ay palabas—
outward remittance. So lugi ang gobyerno.
Dahil sa zero-rated, tubo ang gobyerno, nagbibigay ito ng pabuya:
1. 0% ang export sales; AND
2. You will be allowed to credit all of your input taxes for all of your purchases in manufacturing the
product against your output.
That is a lot of benefit on the part of the exporter Filipino.
‘Pag importation, 12% VAT pero ‘yung iyong input pwedeng i-credit. Anong input mo sa importation? WALA.
- Bakit?
o Eh hindi naman pwede na ‘yung ibinayad mo sa ibang bansa ay i-credit dito eh.
NOTE: So unless you sell the imported items or you do something in the imported item which will incur
expenses, that is the only time that you will credit the input tax.
- ‘Pag import kasi, finished product. ‘Pag diniretso mo lang ng sale, ano lang ang input tax mo?
o Transportation costs, gasoline, kuryente, tubig.
o Kasi unless yung product na inimport mo ay imamanufacture mo into something different—
let us say yung bote ginawa mong ginto—meaning may import ka na raw materials, dun ka
na magkakaroon ng input VAT.
- Pero kung itong tubig inimport ko tapos diretso kong ibinenta sayo, anong input ko? Anong gastos ko
dyan?
o Transportation, kuryente, storage lang. Kasi product to product ang sale.

Kung bakit beneficial ang export sale, may input VAT ka sigurado. Kasi bago mo nagawa yung exported
product, marami kang raw materials na binili. So may input VAT ka.
- So ‘yung lahat ng input VAT na ‘yun, ‘pag binenta ko yung produkto ko sa labas ng bansa ay
mamumultiply sa 0%. So wala akong output.
- Lahat ng input ko na ‘yan ay pwede kong icredit sa aking domestic sales. Eh ‘di beneficial sa akin.
Zero-rated in sale of service
*Sale of gold to BSP now under exmept transaction under TRAIN Law because nagpproliferate ang mining sa
Ph. Dati kasi konti lang gold ngayon marami na. so kapag ginawa mo yang zero rate nalulugi ang gobyerno
kaya exempted na lang.

BPO Industries:
 kapag ang client mo ay nasa labas ng ibang bansa – zero rate kasi export sale of service
 kapag ang client nasa Ph – VATABLE
14
Ano naman ang zero-rated sa sale of service?
- ‘Diba sa sale of good meron tayong export sales, sale of gold bars to BSP, etc. Basta ang lahat ng yan
ang common denominator ay ang bayad ay foreign currency na pinadaan sa banking system.
So ano ang sale of service na zero-rated?

- Repacking ang perfect example.

o ‘Diba pag nagpunta kayo ng hotel, maliit yung sabon, maliit yung asukal, yung toothpaste din.
May mga persons na ang business ay to repack. They don’t produce or manufacture the
product. Since dati the Philippines had the lowest labor cost among Asian countries, yung ibang
bansa dinadala dito yung mga product nila in bulk para iparepack (eg. toothpaste repacking
ng imported brands like Colgate na ipaparepack dito).
 So yung toothpaste na yun kunwari pag tapos na i-repack ay ilalabas ulit. Ang tawag
dun ay ‘re-exporting’. Now, from the time na dumating yung goods dito for
repacking, that is an ordinary importation which should have been subjected to 12%
VAT but it is exempt sabi ng batas.
- ‘Pag nirepack, sale of service, all the way until mailabas ng bansa yung finished product—zero-rate.
o NOTE: PROVIDED, there is no domestic sale.
o Otherwise, the repackaging and everything from the arrival of the importation, to the
pagbayad ng sale of service, up until sa pagbenta sa domestic market may 12% VAT ‘yan. So
tatlo.
 But because the importation is pertaining to a sale of service and to be exported out
of the Philippines, from that time from importation, repacking, to export ay zero-
rate.

(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);

Haven’t you ever wondered why there is no domestic sale of Coach bags here?
- Because domestic sale is not allowed. The PH is one of the biggest production houses of Coach.
- If domestic sale will be allowed, then the importation of the leather will be subject to 12%.
- ‘Yung ginamit dun sa paggawa nung bag, 12%. At yung pagbenta directly sa domestic market, 12%
ulit.
- In effect, the producer will be compelled to pay VAT three times.
- So ‘pag ginawa ‘yan dito, ilalabas uli yan bansa. And we can only buy Coach bags from outside the
country or through importing the finished product itself.
-
Q: What happens if after the production some are exported and some are sold in the domestic
market in Greenbelt?
A:That destroys everything. Import pay ka ng 12%.Sale of service you pay 12%. Sale sa Greenbelt stall
12%. The reason why the government gives you the benefit of 0 rate is because when you hired me you
are promoting my service international yan.

Q: So anong gagawin ni Greenbelt stall?

A: Irreimport ko. Yung franchise agreement kay Coach as the exclusive distributor seller. But because of
the cost in importation of raw materials, hiring me and cost of shipment of the finished product of course
the coach bagwill be expensive.

So if the Greenbelt stall sells the coach bag, may 12% because that is a sale of goods. 12% will be put
on the gross selling price (GSP) which is after inputing all the costs of producing, transporting and
everything else.
NOTE: So again, pag zero-rated, the transaction is not subject to VAT in all stages and you can credit all your
input tax because nakalagay sa batas.
15
EXEMPT TRANSACTIONS (Sec. 109 of the NIRC)
(A) Sale or importation of agricultural and marine food products in their original state, livestock and
poultry of or king generally used as, or yielding or producing foods for human consumption; and
breeding stock and genetic materials therefor.
Ito ikaw isang mangingisda, may nahuli ka na isang balyera ng buhay na bangus. May bumili sayo ng
balyera for P1000.
o Exempt kasi in its original state.
‘Yung bumilli ng balyera, may tindahan sa palengke. Ibinenta niya sa palengke pero patay na
o ‘Yung benta ay exempt.
May natira dun sa paninda, hiniwa at nilagyan ng paminta bawang at suka. Pero di niluto. Nilagay lang sa
plastic at binenta as daing na bangus.
o ‘Yung benta exempt uli.
‘Yung bumilli, pag niluto niya yung bangus at kinain niya.
o Exempt kasi consumer siya.

Pero kung yung nilutong bangus, inihain mo sa restaurant mo,

o VAT-able na to at 12%.

NOTE: THEREFORE, hanggang sa original state lang nung bangus ‘yung exempt, kasi nga nakasulat mismo
sa batas.
- So dapat sa Sec. 109, alam niyo yung stage when the transaction is exempt from VAT.
NOTE: In exempt transactions, the input VAT is not allowed to be credited against the output VAT.

Yung Andok’s nagbebenta nang walang VAT. Ngayon, inassess ng BIR. Sabin ng Andok’s bakit mo kami
iaassess. Sabin g BIR, vatable kayo dapat. You are selling a finished product. Therefore, you should have
been subjected to VAT. Sabin g Andok’s, pakibasa “roasting…”Sabi ng BIR, when we say simple way of
preservation that means that it is not the finished product. That there should be another process to
become a finished product. In your case, roasting results in the finished product. Therefore, it cannot be
considered as exempt. It should be part of the procedure to be exempt and not the finished product.
(R) 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;
- Exempt din yan. So no crediting of input tax.
NOTE: Mas advantageous ang zero-rated kasi pwede mo ipacredit lahat ng input tax mo while 0% lang
yung output mo.

(Q) Lease of a residential unit with a monthly rental not exceeding Ten thousand pesos (P10, 000):
Provided, That not later than January 31, 2009 and every three (3) years thereafter, the amount
herein stated shall be adjusted to its present value using the Consumer Price Index as published by the
National Statistics Office (NSO);
One, may-ari ng residential house pinarerentahan kay A. Two, may-ari ng commercial building
pinarerentahan kay B. May lessor-lessee relationship sa both.
Ang renta mo sa residential house ay P11, 800.00. Exempt o VAT-able?
- Exempt.
Eh P12,799.00?
- Exempt.
P500.00?
16
 - Exempt.
P11, 800.00?
- Exempt.
P12, 799.00?
- Exempt.
P12, 800.00?
- Exempt. Ang sabi ng batas “not exceeding” P12,800.
P12, 801.00?
- Vat-able.
NOTE: PERO kapag commercial ‘yung property being rented out, VAT-able kahit pa magkano yung renta.
(P) 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, residential lot valued at One million pesos (P1,500,000) and below, house and lot,
and other residential dwellings valued at Two million five hundred thousand pesos (P2, 500, 000) and
below: Provided, That not later than January 31, 2009 and every three (3) years thereafter, the amount herein
stated shall be adjusted to their present values using the Consumer Price Index, as published by the National
Statistics Office (NSO);
NIRC TRAIN Law
Sale of real property not No amount No amount
primarily held for sale/lease (still exempted beginning January
to customers 1, 2021)
Low-cost and socialized No amount No amount
housing (still exempted beginning January
1, 2021)
Residential lot below P1,919,500 P1.5M (beginning 2018-2021) 1
P2M (2022)
House and Lot below P2,500,000 below P2M beginning January 1,
20212

P1

Sale of real property not primarily held for sale/lease to customers

7-11.
Japag binebenta ko yung goods ko na coke, vatable kasi hindi sale of real property.
Kapag ang binenta ko ay lugar ng aking 7-11, yung building at land, hindi siya vatable kasi the land
and the building where I have my store is not primarily held for sale/lease to customers.

Real estate business.

Subdivision. Sinubdivide ko ang aking building na ginagamit as office. Kapag binenta ko ito, exempted
because that real property is not primarily held for sale or lease to customers.
Kapag binenta ko itong mga lote, vatable.

1
Kahit piso VATABLE na.Pagkatapos ng 2021, wala na si P1.5M. VATABLE na lahat.
2
Hndi niyo ba naisip, yung isa lote binenta piso mo binenta beginning January 1, 2021, VATABLE e yung
house and lot beginning January 1, 2021 niretain si 2M. May rason ba kung bakit ang lote na binenta mo kahit piso
mo binenta ay VATABLE na? Sinusundan ko lang thoughts niyo ha. Versus a house and lot? Why is there a
difference? Para maiwasan ang pagcconvert ng agricultural land into residential and what the government wants is
proper zoning ng lahat ng lupa sa Pilipinas. Kasi kapag lote lang binenta mo at lahat na lang ng nagpatayo ng bahay
sa subdivision, they can be converted not for residential but for other purposes. Unlike if fully developed into house
and lot, in which case you cannot convert it into commercial or agricultural.
Kapag piso ko ba binet=nta ang lote beginning January 1, 2021 VATABLE or exempt? VATABLE?
17
 P2
Low-cost and socialized housing
Real property. Real estate development. Binebente ko ito into subdivision lots. Low-cost housing
units within the jurisdiction of NHA and HLURB.The proce is regulated and size is imposed.
Developer. Bumili ka ng isa. Ang amount hindi nakaspecify kasi regulated ang price. So binili mo low-
cost housing from the developer. Not vatable. Exempt
Bumili ka ng isa. Same price. Exempt.
What I sold is ordinary asset. No vat because exempt. Whatever profits I realized from the sale is I
will have to declare as part of my revenue side for income tax purposes.
Ikaw tinirhan mo. Binenta mo sa kanya. Walang VAT. Kasi what you sold is capital asset. You pay CGT
of 6% based on GSP or FMV, whichever is higher. You can be exempted unfer Sec.24D.
Ikaw you are in the biz of buying and selling of real properties. Binenta mo sa kanya. Exempt from
VAT if below P3,199,200. From your end, you are actually selling an ordinary asset.

P3
Residential lot
Ang dinivelop ko lote lang. So walang low-cost lots and socialize lots.
Binenta ko sayo yung lot eng P1.8M. Exempt. It is below the threshold of P1,919,500. (TRAIN Law:
VATABLE because the threshold is 1.5M)
Binenta ko pa yung isa kong lot eng P1.8M. Exempt Exempt kayo pareho.
Pinatayuan mo ng bahay. Binenta mo sa kanya. Tinirhan niya. NOT VATABLE because you sold a
capital asset. (TRAIN Law: Never VATABLE because what you sold is a capital asset)
Buy and sell mo. NOT VATABLE because not more that P1,919,500. (TRAIN Law: VATABLE because
the threshold is 1.5M)

May lupa, dinevelop mo into low-cost housing. Pag binenta yung mga bahay at 1.8M each.
- Exempt.
Kung lima ang binili mo.
- Exempt padin.
Suppose si Em tinirahan ‘yung bahay tapos binenta kay Jas ng 2M, not VAT-able but there is tax which is CGT
of 6% under Sec 24 (D), NIRC. Can you be exempt from the CGT of 6%?
- Yes. Provided:
a. It is your actual principal residence;
b. You inform BIR 30 days from sale that you are availing of the exemption;
c. You buy or build another actual principal residence within 18 months from date of sale;
d. You avail of the exemption once every ten years; and
e. The historical cost shall be considered in determining how much should be exempt.
So kung nagbenta ka ka kay A ng 5 residential houses under low cost housing at P1,800,000.00 each.
- Exempt yan.
NOTE: Wala naman low cost housing na sumosobra sa P1,919,500.00 kasi regulated ang presyo
niyan.
Pero kung yung buyer na si A ay ibinenta ulit ‘yung limang residential houses na ‘yun pursuant to his
real estate business, that is buy and sell, at binenta niya ng P1,900,00.00 ang bawat isa .
- Exempt ito from VAT.
‘Pag binenta niya ‘yung house and lot ng P2,500,000.00 each.
- Exempt pa rin kasi ‘pag house and lot ang threshold ay P3,199,200.00 and below.
- Why? Kasi tignan niyo ‘yung letter (P). Apat na magkakaibang exemptions ang tinutukoy
dyan:
1. Una, it refers to “sale of real properties not primarily held for sale to customers or held for
lease in the ordinary course of business.”
2. ‘Yung pangalawa ‘yung referring to low-cost and socialized housing.
3. Pangatlo naman ‘yung residential lot valued at P 1,919,500 and below.

18
 4. Pang-apat yung house and lot and other residential dwellings valued at P 3,199,200.00 and
below.
Makikita niyo ‘yung difference:
 ‘Dun sa una CGT yung tax kasi capital asset yung binenta ni Em kay Jas.
 ‘Yung dito sa recent, yung binenta ni A ay ordinary asset. So yung issue is kung subject to VAT or
not. Kung binenta ni A yung house and lot ng mas mababa sa threshold na P 3,199,200.00 na
sinasabi ng batas, no VAT.
1st item in letter (P): Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business
- Walang amount dyan, the amount is not material.
Take the case of McDo. Iyo ang building, iyo ang lupa meron kang lupa, sarili mo ang lupa ng business mo.
Tinayuan mo ng McDo vs. Meron kang isang lupa na pinarentahan kay Mr. Cruz. You are engaging in a trade
or business. Various businesses. You have a lot with you and you own McDo and you have a lot with you
which you lease to Mr. Cruz.

Parehong lote, binenta mo ng P4,000,000.00 each. Ayaw mo na ng McDo ibinenta mo kasama ang lupa at si
building, P4,000,000.00 each or P10,000,000.00. May VAT?
- Wala.
- The real property is held by me not primarily for sale or lease for business.
Eto (maybe pointing to the other example)
- VATable because primarily for sale or lease to customers.
NOTE:
Both are ordinary assets because both are used in trade or business.
A. When I sell this one (‘yung may Mcdo), not primarily held for sale or lease to customers,
EXEMPT from VAT. Tax due then is NIT.
B. For this one (‘yung pinaparentahan kay Mr. Cruz) VAT will be imposed and if there is income
from the sale, NIT plus VAT.
BUT both assets are ordinary therefore no CGT will be imposed.
This is enumeration number one sa letter (P). Walang amount. Regardless of amount yan. So yung isa walang
VAT, yung isa may VAT.
- Kahit magkano amount may VAT basta primarily held for sale or lease to customers. Apat yan. ‘Yung
(P)(1) ay ‘yung ordinary assets not held for sale or for lease to customers.
- Kung ito walang McDo, ‘di ko ginagamit for trade or business, capital asset siya. Walang VAT. CGT yan.
NOTE: Depende ‘nung time na binenta ano ba siya. Capital or ordinary. The use during the time of the sale
is determinative. Since business is Mcdo this may be converted to ordinary to capital. Pero you have to
prove it to me. It is a matter of proof.
Relate to Sec. 39 of NIRC enumerating what are the capital assets. ‘Diba they are OTHER THAN the listed
ordinary assets.
1. Stock in trade of the taxpayer;
o (eg. Burger, mantika, patty, refrigator,). Yan yun. Ordinary.
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;
o Whether real or personal ‘pag nakalagay sa sa inventory.
3. Property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or
business;
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;
5. Real property used in trade or business of the taxpayer.
NOTE:
 Kahit ordinary asset, ‘pag binenta walang VAT dahil sa Section 109 sinasabi exempt. Correlate
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 Sec. 109 with Sec. 39.
 Pero ‘pag yung ordinary asset mo subject to sale or lease, may VAT.

(Q) Lease of a residential unit with a monthly rental not exceeding Ten thousand pesos (P10, 000)
P12,800 io hindi 10k: Provided, That not later than January 31, 2009 and every three (3) years
thereafter, the amount herein stated shall be adjusted to its present value using the Consumer Price
Index as published by the National Statistics Office (NSO);

(TRAIN Law: P15k)

Lessor A pinrentahan sa aking ng P5k. VATABLE kasi kapag commercial kahit piso lang ang renta
VATABLE. Kung residential, yung example natin na si X and Y, kung si Y nagrerenta ng bahay kay Mr. A,
residential VATABLE kung lalagpas ang renta ng P12,800 (NIRC) P15k (TRAIN Law). But both under the NIRC
and TRAIN Law, kapag ang pinarerentahan ni Mr. A kay Y ay parlor or yung 7-11 na lang, piso o 1k, VATABLE
yan lahat.

Additional Exemptions under TRAIN Law:

1.sale or lease of goods and services to senior citizens and persons with disabilities. (kahit wala ito da
TRAIN Law, exempt pa rin kasi nakaspecify siya sa special law)
2. Exemption of the importation of fuel, goods and supplies shall only apply if such are used for
international shipping or air transport operations.

Cebu Pacific or PAL. Local airline. Nag-import ng fuel. Yung fuel na ginamot sa domestic flights,
VATABLE. Pero kapag ginamit yung fuel sa international flights, EXEMPT.
Under NIRC, kasehodang domestic or international flights ginamit yung fuel, EXEMPT.

2.transfers of property pursuant to Section 40 (C)(2) of the Tax Code. (merger and consolidation)
3.association dues, membership fees, and other assessments and charges collected by homeowners
associations and condominium corporations.

Comm. Kim: Condominium Corporation Act at Homeowner’s and Homeowner’s Association

Subdivision Act. Ang difference yung former nasa building pero yung isa bahay sa lupa. Dun sa Subdivision
Act, ang membership dues ay exempted sa VAT. Unfortunately, sa Condo Act walang nakalagay. Parehong
bahay at residential. Isa nakapatong sa lupa, yung isa nasa gitna ka ng building. Yung isa libre sa VAT, yung isa
hindi. The BIR cannot do anything because the law itself says so. So ngayon pinagpantay na.

1 4. Sale of gold to BSP is now classified under VAT exempt transactions.

2 5. Beginning 1 January 2019, sale of drugs and medicines prescribed for diabetes, high cholesterol
and hypertension would be included as VAT exempt transactions.
3 DOH will provide for the IRR on what are the medicines prescribed on 2019.
6. (BB) Sale or lease of goods or properties or the performance of services other than the
transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the
amount of Three million pesos (P3,000,000). (from P1,919,500 under NIRC)

(W) 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 One million five hundred thousand pesos (P1,500,000.00): Provided, That not later than
January 31, 2009 and every three
(3) years thereafter, the amount herein stated shall be adjusted to its present With footnote in the
book value using the Consumer Price Index, as published by. the National Statistics-Office (NSO);

Sa madaling sabi:
1. Wala sa listahan na A-V; and
2. Ang gross sales ay ‘di nag eexceed ng P1,919,500 .00

TRAIN Law: EXEMPTED

1. Wala sa A- AA; and

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 2. Di ka umabot ng P3M.

Opposite: NOT EXEMPTED

1. Wala sa A-V/ AA+ umabot sa threshold (ex. capital asset)
2. Nasa A-V/AA+ umabot sa threshold (ex. baboy binenta ko ng P10M)
No VAT pero magbabayad ka ng percentage tax na 3% of the gross.
SO dalawang negative yan ha? Pag may isang positive, wala yan sa letter (W).
Pharmacy. Merong Pharmacy sa palengke nagbebenta ng biogesic. Eto Mercury nagbebenta ng biogesic. Sa
palengke walang VAT. Sa Mercury may VAT. Bakit?
- Ang mercury nag e-exceed ang gross sales ng P1,919,500.00.
Magnolia chicken. Sa palengke walang VAT. Sa Savemore may VAT.
- Eh sasabihin “original state edi nasa letrang (A)”. Eh ‘di kaya ay letrang (W)? Para ma-exempt
wala sa (A)-(V) at ‘di nag-exceed sa P1,919,50000.
o If you miss in one condition then it is automatic, VATable. Ang opposite niyan ay both are
not present or one is present, VAT-able.

May poultry ka may piggery ka binenta mo sa Purefoods, P10,000,000.00, VATable ka or exempt? Nandoon
ba sa bentang ‘yun ang dalawa?
- Nasa una ka pero wala ka sa pangalawa edi hindi ka exempt. VATable ka.
Kandila. Kandila hanapin mo sa (A)-(V) wala. Ang sales ko P1,500,000.00.
- Exempt.
Kandila sales ko P2,000,000.00.
- VATable. The gross sales must not exceed P1,919,500. Lahat ng opposites niya VATable.
NOTE: Hindi kina-qualify ng (W) and (A)-(V).
- It depends on what are you selling.
- ‘Pag ikaw ay hindi registered sa VAT, wala kang output.
A. What if you are required to be registered but you are not registered:
- You shoulder all the output as if no input was made. Yan ang effect niyan.
1st effect: ‘Di ka pwede mag-impose ng 12%.
- Anong mangyayari sa input mo?
o Wala, eh hindi ka naman rehistrado eh.
- Ang presumption ng law because you are supposed to register and you do not register, you
shoulder all output.
- You get the output from your own pocket because you cannot impose the 12%.
B. What if you are not required to be registered but you registered:
- Mag impose ka ng 12% and all of your input VAT may be credited.
- The fact you are registered, the law recognizes that your gross sales in a year may exceed
P1,919,500.00.
What do you do if you feel you will not reach P1,919,500.00?
- Do not register.

- BUT if at any given time you think that your gross sales for the year will exceed P1,919,500.00, you
must register. Otherwise, your crediting of output less input will not be allowed.
NOTE: The most important proof, before you can credit the input tax, is the official receipt. Yan ang
titignan ng BIR.

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Requirement for billing of VAT
If your receipt merely states: Selling price P112.00/burger. 1 burger is equal to P112.00
- The assumption is it is exclusive of VAT. Therefore, times 12%.
- The assumption is that you did not collect 12% output VAT.
‘Pag ang kontrata niyo legal service professional fee P40,000.00 only.
- It does not mean that 12% is included.
- It means that it is exclusive of VAT and that’s your failure to impose the 12% against your client.
- Dapat ang siningil mo ay P44,800.00 para inclusive of VAT.
- Dahil ‘di mo chinarge ang client ‘nung P4,800.00 na VAT, therefore you should shoulder the
output tax of 12%.
NOTE: Ngayon hindi allowed ang billing ng VAT na inclusive. The assumption is always that the price
indicated does not include VAT. VAT must be separately indicated. Without separate indication output VAT
will be shouldered by the seller.
May isang lote binili mo ito. Six months after binili mo ito adjacent lots. P1,500,000.00 each yung adjacent
lots. Kapag adjacent lots, ang threshold ng dalawa ay P1,919,500.00. Hindi nagdodoble.

- So both VATable na kasi ang total is P3,000,000.00.

NOTE: When you buy adjacent lots threshold remains P1,919,500.00.

- What is the Logic?
o When you buy adjacent lots you can build one house in the middle or wherever
within the two adjacent lots.
Lote may bahay, lote may bahay, magkatabi. Binili mo yung dalawa within 6 months bawat isa
P3,000,000.00.

- Exempt.
- Why?
o Threshold sa bahay at lote = P 3,199,200.00. Exempt pareho. Hindi pinagcocombine.
o They are treated individually because it is impossible for the taxpayer to maintain 2
adjacent house and lots and live in the two. That is why the threshold remains at
P3,199,200.00 for each.

NOTE/S:
1. Within 100 meters, considered as adjacent lots.
2. If the transactions sa pagbili ng adjacent lots are within 1 year, ‘dun lang pumapasok yung
rules.
3. Kapag ang bentahan ng house and lot in the course of business, then that is the only time you
consider the threshold of P3,199,200.00. If the latter sold the house and lot are capital assets,
walang pag-uusapan na VAT, CGT ‘yun.

2:44:00

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2nd distinction:
Zero Rate Exempt
Input VAT is allowed to be credited against output not
VAT.

Ex.
Meron kang inaalagaang 3 manok:
Chicken 1 (C1)
Chicken 2 (C2)
Chicken 3 (C3)
Sa pag-alaga ng manok, bumili ka ng kuryente na P600. Ang binayad mo ay P600 x 12% = 672. Yung P72
ang tawag mo ay input. Magkano bawat isang manok ang input? 24.
Si C1 pinalaki. Aba ang ganda ng porma. Nakita ni buyer. Binili. Ok i-export natin. Export si C1. Magkano?
5k. Walang VAT kasi zero rated ( x 0%).
Chicken 1 (C1) – export – 0
Si C2 and 3, tinadtad ginawang adobo at ibinenta mo sa tindahan sa restaurant. Nabenta ng P3k. So 3k x
12% = P3,360. Dahil 2 ng manok, magkano ang iyong output VAT?
Chicken 2 (C2) – P180
Chicken 3 (C3) – P180
Sa C1 walan kang ouput VAT pero sa 3 may input VAT ka na 24.
So in Zero rate:

P360 (output VAT)

- P24 (input VAT)(C1)
P 24 (input VAT)(C2)
P 24 (input VAT)(C3)
P288 (ibabayad ito sa BIR)

Gawin nating exempt. Hindi inexport si C1. Ang ginawa binenta sayo. Dahil exempt 0 output.

P360 (output VAT)

- P03 (input VAT)(C1)
P 24 (input VAT)(C2)
P 24 (input VAT)(C3)
P 312

Q: Alin ang mas maraming babayaran sa gobyerno?

A: Exempt. The input Vat for C1 is not allowed to be credited against output VAT. Unlike in zero rated
transaction, the input VAT for C1 is allowed to be credited against output .

Q: Why does the law give more benefit to Zero-rated?

A: The government benefits more in Zero Rated by:
1. increasing the foreign reserves
2. promoting the manok in the market

2 rin ang ibibigay na kapalit ng gobyerno:

1. zero rate
2. input VAT is allowed to credited against output VAT if the transaction

So yung BPO industry na ang client ay abroad at local. Yung lahat ng input VAT sa lahat ng aking
ginagastos sa Pilipinas ay kncredit against output sa domestic sales. Kasi export so 0 output yun.

Administrative provisions on VAT: (BAR)

3
The input VAT is not allowed to credited against output VAT if the transaction is EXEMPT.
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 Sec. 112 .(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one
hundred twenty (120) days from the date of submission of complete documents in support of the
application filed in accordance with Subsections (A) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the
Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within
thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred
twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals.

This is not an ordinary refund. This is more of an exceptional type of refund. What is being refunded is
the excess input VAT in 0 rated transaction.
Q: How can that happen?
A: Look at these chickens.
Let us say, for export si C1. So meron akong input VAT na 24x 3= 72, at may 0 output ako. Let us say, may
domestic sale pero nabenta ko ng mura P150 x 12%= P168. P18 x 2= 36 for C2 and 3.
P36 (output)
- P72 (input)
P36 (excess input VAT in 0 rated transaction)

Under, Sec. 112, I have the remedy of claiming the refund of the excess input VAT P24 attributable to the
0 rated transaction.
A.
I should file the claim of refund within 2 years from close of the quarter where I had the sale of C1 for
export (where I had the 0 transaction). So kung binenta ko yan ng Feb 14., bibilangin ang 2 taon sa mula March
31, 2018 to March 31,2020. I should file the claim for refund withing this 2 year period anytime from March 31-
April 1, 2018 to March 31, 2020.
B.
I file the claim for refund in the BIR (RDO having jurisdiction over me). This is an administrative claim
for refund because you file it with the BIR.

Let us day, finile ko June 20, 2019, valid? Yes. And within 120 days from June 20, 2019, kunwari August
28 ang ika-120th day, nag-expire si 120 na hindi nagdedesisyon si BIR kung granted or denied. Pagkatapos ng
120, bilang ka ng 30 then akyat ka ng CTA (must go up, strictly construed) because the claim for refund is
deemed denied. Therefore, the remedy of the taxpayer is to file an appeal to the CTA division within the period
of 30 days from the expiration of 120 days.
2:120:30
Before, ang ginagawa ng taxpayers when they file a claim for refund, they don’t file it na kumpleto
attachments and documents para hindi tumakbo si prescriptive period. Kasi pwede naming magfile ng
supplemental.Nalaman ng BIR. Under the NIRC, di na umubra kas kapag finile mo si claim for refund, you will
be required to submit a statement that your claim for refund is complete in form and substance or you will have
to state if incomplete that such is incomplete. Assuming that it is incomplete, you are going to complete the
claim within the period of ganito para sure na tumakbo. If ang statement mo is complete, date of filing run the
120. If incomplete, hindi tatakbo pero kinomit mo na may date kang kukumpletuhin mo at di mo kinumpleto,
tatakbo na yan.

The judicial claim for refund must likewise be filed within 30 days after the expiration of the 120 day
period.

TRAIN LAW:
Wala na yung deemed denied. In other words, with or without decision. Pero assuming may decision na
denied at doon palang sa 50 th day ayy hindi ka maghihintay ng expiration, pagkatanggap mo ng decision, 30
araw bilang na. This is on the assumption that no decision denying the claim for refund has been rendered by
the BIR.
Under TRAIN Law, ang number na ay : 2: 90:30. Same principle. When the 90 day period expires, you
must go to the CTA by appeal within a period of 30 days. Otherwise, your claim for refund is denied with
finality.

NIRC TRAIN LAW

24
 No shall be deemed denied decision. Hindi granted
nor denied. Hindi ka rin maghihintay. But you must
go up.

It is a form of deterrent. Kasi ang ikli ng 3 or 4

buwan sa BIR so ginagawa ng BIR officers kapag may
nagfile ng refund hindi aactionan kasi 30 days after
aakyat din naman yan. Ah ngayon di na uubra yun.

Kapag hindi dinesisyonan sa loob ng 90 days, meron

silang punishment.

Provided, however, that failure on

the part of any official, agent, or
employee of the BIR to act on the
application within the ninety (90)-
day period shall be punishable
under Section 2694 of this Code.

2:120:30 (may) 2: 90:30 (may)

Pero sa jurisprudence “must”? Do we apply the same
rule sa TRAIN Law? Kung ako, must kasi input VATsa
0 rated transaction ang daming pera. Supposedly
beneficial sa taxpayer but because hindi mo ngamit
parang di ka nagbenefit so what ‘s the point if you
cannot claim it for refund. Kung mageexpire yan ng
90 tapos hindi na pwdeng umakyat, kawawa ka
naman.

4
(j) Deliberate failure to act on the application for refunds within the prescribed period provided under Sec. 112 of this
Act.

SEC. 269. Violations Committed by Government Enforcement Officers. - Every official, agent, or employee of the Bureau
of Internal Revenue or any other agency of the Government charged with the enforcement of the provisions of this Code, who is
guilty of any of the offenses herein below specified shall, upon conviction for each act or omission, be punished by a fine of not less
than Fifty thousand pesos (P50,000) but not more than One hundred thousand pesos (P100,000) and suffer imprisonment of not
less than ten (10) years but not more than fifteen (15) years and shall likewise suffer an additional penalty of perpetual
disqualification to hold public office, to vote, and to participate in any public election:

25