Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Personal Properties
Tangible – Sec 416, NCC
Intangible – Sec 104, NIRC
TAX 2 REVIEWER
General Rule: Situs of Taxation of Intangible Personal
Property is at the domicile or residence of the owner.
TRANSFER TAXES
Preliminaries: EXPN: When the law provides otherwise. Example:
Sec. 104, NIRC:
Estate and Donor’s Taxes are Transfer Taxes which
refer to the burden used upon the right to gratuitously The following are considered Intangible Personal
transfer or transmit property, tangible or intangible properties situated in the Philippines: (Sec 104,
from one person to another. NIRC):
Franchises which mus- be exercised in the
Estate Tax Donor’s Tax
Subject Right to Transfer Right to Transfer
Philippines;
Taxpayer Estate Donor Shares, obligations, or bonds issued by any
Liability to Pay Administrator, Executor Donor corporation or Sociedad anonima organized
or Legal Heir
or constituted in the Philippines in
Effectivity Upon Death Lifetime of the
Donor accordance with its laws;
Tax Base Net Estate Net Gift Shares, obligations or bonds by any foreign
Ceiling P200,000 P100,000
corporation 85% of the business of which is
(Exemption)
Filing Within six (6) months Within 30 days from located in the Philippines;
from date of death date of donation Shares, obligations or bonds issued by any
Top Rates 20% 15% - Relative
foreign corporation if such shares,
30% - Stranger
obligations or bonds have acquired a
business situs in the Philippines; and
Shares or rights in any partnership,
ESTATE TAX
business or industry established in the
Philippines.
These are transfers made by decedent during his These items are actually deductions but for
lifetime but the use, enjoyment, and possession thereof them to be claimed as deductions, their value must first
is subject to his power to alter, amend, revoke or be included in the gross estate.
terminate at the time of his death.
1. Claims Against Insolvent Persons
Example: 2. Unpaid Mortgage
Alpha donated to Bravo a parcel of land worth P5M but
retained to himself the power to alter, amend, revoke or terminate the
3. Property Previously Tax
donation at the time of his (Alpha’s) death. 4. Family Home
Here, the property is deemed to be Alpha’s such that if Bravo 5. Amounts received under RA 4917
died before Alpha, such property will not be part of Bravo’s estate.
Likewise, if Alpha died first, such property is part of Alpha’s estate.
7) EXCLUSIONS FROM GROSS ESTATE
d) Property Passing Under General Power of
Appointment: a) Capital of the Surviving Spouse
Note: The amount received by the heirs as The following shall not be taxed:
a consequence of death of decedent-
employee must be included in the gross A. The merger of usufruct in the owner of the
estate for it to be deductible. naked title;
B. The transmission or delivery of the inheritance
8. Share of Surviving Spouse or legacy by the fiduciary heir or legatee to the
After deducting the allowable deductions fideicommissary;
appertaining to the conjugal or community C. The transmission from the first heir, legatee, or
properties included in the gross estate, the share of donee in favor of another beneficiary, in
the surviving spouse (1/2) must be removed to accordance with the desire of the predecessor;
ensure that only the decedent’s interest in the and
estate is taxed. D. All bequests, devises, legacies or transfers to
social welfare, cultural, charitable institutions,
Formula: no part of the net income of which insures to the
benefit of any individual: Provided, however,
Conjugal Properties xxx that not more than 30% of the said bequests,
LESS Conjugal Deductions xxx devises, legacies or transfers shall be used by
Net Conjugal Estate xxx such institutions for administration purposes.
LESS Share of Surviving Spouse (Sec 87[A] to [D], NIRC)
In the Net Conjugal Estate E. Bequests to be used actually, directly and
(1/2) xxx exclusively for educational purposes under Art.
Decedent’s Interest in the XIV, Sec. 4(4) of the 1987 Constitution.
Net Conjugal Properties xxx F. Exemptions under Reciprocity Clause
G. Exemptions under Special Laws, such as:
9. VANISHING DEDUCTIONS or PROPERTY a. Capital of the surviving spouse under
PREVIOUSLY TAXED (PPT) Sec. 85(H) of NIRC.
b. If the net estate is P200,000 or below
The concept of Vanishing deduction is simply to under Sec. 84 NIRC
minimize the effect of taxing twice the same c. Benefits received from SSS and GSIS,
property within a period of 5 years. Hence, avoiding under PD 1161 and PD 1146,
or minimizing double taxation. respectively, as amended.
d. Benefits received from US Veterans
Requisites: Administration under RA 360 or War
The property situated in the Philippines must be Benefits under RA 227.
included in the Gross Estate of the present H. Death of Individual not subject to Estate Tax.
decedent. Requisites:
The present decedent must have died within 5 a. In case of decedent registered with the
years prior to the death of the prior decedent BIR who has no properties subject to
estate taxes, the heirs shall request for
cancellation of the decedent’s TIN in a 3. Such part of such information as may at the
proper form. time be ascertainable and such supplemental data as
b. The documentary requirements shall be may be necessary to establish correct taxes.
submitted to the BIR district office Provided, however, that estate returns showing
where the TIN of the decedent is a gross value exceeding P2,000,000 shall be supported
registered. with a statement duly certified by the CPA containing
c. In addition to the above, an affidavit the following:
shall be submitted by the heirs stating 1. Itemized assets of decedent with its
that the decedent has no properties corresponding gross value
subject to estate taxes. 2. Itemized deductions
d. The BIR district office shall notify the 3. Amount of tax due paid or not paid or
heirs, administrators or executor outstanding.
applying for cancellation of decedent’s
TIN of the status of the request within Time of Filing:
10 days from complete submission of It shall be filed within 6 months from the
the requirements. (RR-7-2012) decedent’s death.
A certified copy of the schedule of partition and
11. DATE-OF-DEATH VALUATION PRINCIPLE the order of the court approving the same shall be
furnished the Commissioner within 30 days after the
The properties comprising the gross estate shall promulgation of such order.
be valued based on their FMV as of the time of death.
In case of real property, the FMV shall either be Extension of Time
that determined by the Commissioner or that fixed by Commissioner may grant a reasonable
the provincial and city assessors, whichever is higher. extension not exceeding 30 days, in meritorious
Any post-death developments like compromise or cases.
condonation, etc., is immaterial in determining the net
value of the estate. (Dizon vs CTA citing Ithaca Trust Place of Filing:
Co. case) 1. An authorized agent bank, or
2. Revenue District Officer, Collection Officer, or
Note: In case of Shares of Stocks …. 3. Duly authorized treasurer of the city or
In case of Right to Usufruct, use or habitation, municipality in which the decedent was domiciled at
as well as that of annuity … the time of his death or if there be no legal residence
in the Philippines, with the Office of the
12. FILING OF NOTICE OF DEATH OR ESTATE TAX Commissioner.
RETURN
13. PAYMENT OF ESTATE TAX
A. Filing of Notice of Death
Time of Payment
Mandated in the following cases: At the same time the Return was filed by the
1. In all cases of transfers subject to tax, administrator, executor or heir or simply under the “pay
or as you file system.”
2. When, though exempt from tax, the gross
value of estate exceeds P20,000. Extension of Time
Coming to the case at bar, the notarial fee paid for the Second. Such construction finds relevance and
extrajudicial settlement is clearly a deductible expense consistency in our Rules on Special Proceedings wherein
since such settlement effected a distribution of Pedro the term "claims" required to be presented against a
Pajonar's estate to his lawful heirs. Similarly, the decedent's estate is generally construed to mean debts
attorney's fees paid to PNB for acting as the guardian of or demands of a pecuniary nature which could have
Pedro Pajonar's property during his lifetime should also been enforced against the deceased in his lifetime, or
be considered as a deductible administration expense. liability contracted by the deceased before his
PNB provided a detailed accounting of decedent's death. Therefore, the claims existing at the time of
death are significant to, and should be made the basis
of, the determination of allowable deductions.
DONOR's TAX 7) DEDUCTIONS OR EXEMPTIONS FROM GROSS
GIFT
Valuation of Donation: In order to be exempt from donor's tax and claim full
deduction from gross income of the value given to
If cash: value or face amount of cash qualified donee institutions, the following conditions
Personal property: FMV at time of donation must be complied with:
Real Property: FMV fixed by the Provincial and
City Assessor or the FMV as determined by the Donee is registered under Philippine Council for
BIR Commissioner, whichever is higher. NGO Certification, Inc. (PCNC);
Donor is engaged in business or engaged in the Other information that the Commissioner may
practice of profession; require.
Donor gives Notice of Donation on every
donation worth at least P50,000 to RDO having Time and Place of Filing:
jurisdiction over his place of business within 30 Return shall be filed within 30 days after the date of the
days after receiving donee's Certificate of gift was made.
Donation. Payment shall be at any of the following:
The Certificate of Donation shall be attached to Authorized Agent Bank
the Notice of Donation stating that Not more Revenued District Officer
than 30% of the said donation for the taxable Authorized Treasurer of city or municipality
year is used by such qualified-donee in where donor was domiciled at time of
administratio purposes. transfer.
If there be no legal residence in the Philippines,
10) TRANSFERS FOR LESS THAN ADEQUATE AND at the Office of the Commissioner.
FULL CONSIDERATION In case of gifts made by NRA or NRC, payment
may be made with the Philippine Embassy or
This happens when the Fair Market Value of the property Consulate in country where he is domiciled at
exceeded the value of the consideration (selling price). time of transfer or with the Office of the
Commissioner.
Element of donative intent is conclusively presumed in
these transfers for less than adequate consideration. 13) PAYMENT OF DONOR'S TAX
Pay as you file.
It does not apply on sale of Real Properties as capital
assets located in the Philippines. 14) TAX CREDIT FOR DONOR'S TAXES PAID IN A
FOREIGN COUNTRY
Relate this topic on 5%/10% CGT on disposition of not
traded shares of stocks. Amount of tax credit is limited to the following
limitations, whichever is LOWER:
11) TRANSFERS WHICH MAY BE CONSTITUTED AS
DONATION Limitation A:
Condonation or Remission of the Debt (RR No. 2): Net Gifts(per foreign country) x Philippine = limit
Total Net Gifts. Donor's Tax
1) If an individual performs services to the creditor, who
in consideration thereof cancels the debt, income to the
Limitations B:
amount is realized by the debtor as compensation for
services. Net Gifts(all foreign country) x Philippine = limit
2) If a creditor merely desires to benefit a debtor and Total Net Gifts. Donor's Tax
without any consideration therefor cancels the debt, the )
amount of the debt is a gift from the creditor to the The above formulas are only applicable if there are two
debtor and need not be included in the latter's gross or more foreign countries. In case there is only one,
income. apply only Limit A.
3) If a corporation to which a stockholder is indebted
forgives he debt, the transaction has the effect of Note: For illustration, see page 76, Tax 2 Revealed, Chavez,
payment of dividend. 2014 edition
VAT is a tax on consumption levied on the sale, Hence, even if he is exempted as a seller from his direct
barter, exchange 6r lease of goods or properties and liability for payment of VAT, but he is not relieved as a
services in the Philippines and on importation of goods purchaser from is direct burden of VAT shifted to it by
into the Philippines. its VAT-registered suppliers, the purchase transaction is
not VAT exempt. (CIR vs Seagate)
Invoice Method aka Tax Credit Method: Under the
VAT method of taxation, an entity can credit against or Note: Philippines utilize EXEMPT TRANSACTION.
subtract from the VAT charged on its sales or outputs,
the VAT it paid on its purchases, inputs and imports. 2) CHARACTERISTICS OF THE PHILIPPINE VAT
SYSTEM
Note: In every taxable quarter:
B- Indirect
Invoices Passed (Output Tax) A– Ad Valorem
LESS Invoices Received (Input Tax) R- Regressive
Tax payable to BIR O– Excise
P- General
A. If result is negative, i.e. the invoices received S- National (NIRC)
exceeds the invoices passed, the excess shall be
carried over to the succeeding quarter or 3) IMPACT OF TAXATION vs INCIDENCE OF
quarters. (Added to Output Tax in the TAXATION
succeeding quarters).
While the liability on VAT is imposed on one person, the
B. If the input taxes result from zero-rated or burden may be passed to another.
effectively zero-rated transactions or when the
taxpayer would be cancelling his VAT- The Impact of taxation is on the seller because it is the
registration, any excess input taxes over the one who is statutorily liable for the payment of the tax.
output taxes may instead be refunded to the
taxpayer. Note: In the case of importation, the importer is
Hence, there is no tax cascading or the one liable for the VAT. (RR-16-2005)
pyramiding because what has been subjected to
VAT before may not be further subjected to VAT. However, the Incidence of the tax is on the final
consumer where the tax comes to rest. The law
VAT Rate: provides that the amount of the tax may be shifted or
12% - Secs 106 (A); 107 (A),(B); and 108 (A) passed on to the buyer, transferee or lessee of the
of the NIRC goods, properties or services.
0% - Secs. 106 (A)(2); and 108 (B) of NIRC
4) CROSS-BOARDER DOCTRINE AND
To be liable for VAT: DESTINATION PRINCIPLE
Persons liable under Sec. 105;
The amount of gross sales or receipts exceeds Cross-Boarder Doctrine: No VAT shall be imposed to
the threshold (P1,919,500.00); form part of the cost of goods destined for consumption
It is not one of the exempt transactions under outside of the territorial boarder of the taxing authority.
sec. 109 par. (a) to (v);
Regardless of annual gross sales or receipts if Destination Principle: Goods and Services are taxed
the taxpayer opted to be a VAT registered only in the country where these are consumed.
person; or
An importer whether engaged in the course of Hence, actual export of goods and services from
business or trade. the Philippines to a foreign country must be free of VAT;
while, those destined for use or consumption within the
Note: Profit is not a requirement for imposition Philippines shall be imposed with 12% VAT.
of VAT.
Note: By virtue of Cross-Boarder Doctrine, PEZA-
EXEMPT TRANSACTION vs EXEMPT PARTY registered enterprise are VAT-exempt and no VAT can
be passed on to them since Section 8 of PEZA Law (RA
Exempt Transaction Exempt Party 7916) states that Ecozones are foreign territory.
1) Involves goods and 1) It is a person granted
services exempted from VAT exemption by virtue
VAT, regardless if the of which the party as
party to transaction is well as the transaction
VAT-exempt or not. becomes exempted from 5) RULE OF REGULARITY
tax.
2) Seller here is not 2) Party may be allowed VAT is imposed on a sale or transaction entered into by
allowed any tax refund a refund of or a credit for a person in the course of trade or business. A
of or credit for any input input taxes paid, transaction will be in the course of trade or business if
taxes paid. depending on its it is:
registration as a VAT or Regularly conducted
non-VAT taxpayer. Undertaken in pursuit of a commercial or
economic activity
EXPN: the invoice or receipt the term “VAT-exempt
1) Non-resident persons who perform services in the Sale”, the issuer shall be liable to account for
Philippines are deemed to be making sales in the course the tax imposed in Sec. 106 or 108 as if Sec 109
of trade or business, even if the performance of services did not apply. (Sec. 113 D-2)
is not regular. (RR 16-2005).
The value-added tax is an indirect tax and the
BIR imposes an obligation on the part of the payor to amount of tax may be shifted or passed on to
withold the corresponding vat. the buyer, transferee or lessee of the goods,
properties or services. This rule shall likewise
Note: apply to existing contracts of sale or lease of
1) An importer, whether or not engaged in the course of goods, properties or services at the time of the
trade or business, is subject to VAT. (Sec. 107, NIRC) effectivity of RA 7716.
2) Even non—stock, non-profit, organization or
government entity, may be liable to pay VAT on sale on In the course of trade or business
goods, properties or services as long as the entity Regular conduct or pursuit of a commercial or
provides service for a fee, remuneration or an economic activity, including transactions
consideration. (CIR vs CA & Comaserco, 2000) incidental thereto, by any person regardless of
3) Incidental transactions (see Mindanao Geothermal whether or not the person engaged therein is a
case.) nonstock, nonprofit private organization
(irrespective of the disposition of its net income
6) TRANSACTIONS COVERED BY VAT and whether or not it sells exclusively to
members or their guests), or government
VAT on sale of goods or properties (Sec. 106 entity.
[A][1]) EXN: non-resident persons who perform services in the
Sales of VAT-registered person subject to zero Philippines are deemed to be making sales in the course
percent (0%) rate: of trade or business, even if the performance of services
o Export Sales (Secs 106[A][2][a]) is not regular.
o Foreign Currency Denominated Sale
(Sec. 106 [b]) Nature and Characteristics of VAT
o By special laws or international
VAT is a tax on consumption levied on the sale, barter,
agreements (Se 106 [c]);
exchange or lease of goods or properties and services in
o Transaction subject to zero percent
the Philippines and on importation of goods into the
(0%) rate (Sec. 108 [B]) Philippines. The seller is the one statutorily liable for the
Transaction deemed sale (Sec. 106 [B]) payment of the tax but the amount of the tax may be
VAT on Importation of goods (Sec. 107 [A]) shifted or passed on to the buyer, transferee or lessee
Transfer of goods by tax-exempt person (Sec. of the goods, properties or services. This rule shall
107 [B]) likewise apply to existing contracts of sale or lease of
VAT on sale of services and use or lease of goods, properties or services at the time of the
properties (Sec. 108 [A]) effectivity of RA No. 9337. However, in the case of
Franchise grantees under Sec.119 importation, the importer is the one liable for the VAT.
d. Input tax from payments made to non-residents Zero-rated or effectively zero-rated sales
(such as for services, rentals and royalties) shall be Apply for the issuance of a tax credit certificate or refund
supported by a copy of the Monthly Remittance Return of creditable input tax due or paid attributable to such
of Value Added Tax Withheld (BIR Form 1600) filed by sales (except transitional input tax, to the extent that
the resident payor in behalf of the non-resident such input tax has not been applied against output tax)
evidencing remittance of VAT due which was withheld within two (2) years after the close of the taxable
by the payor. quarter when the sales were made.
e. Advance VAT on sugar shall be supported by the Provided that in case of:
Payment Order showing payment of the advance VAT. 1. sale and actual shipment of goods from the
(Sec. 4.110-8 RR 16-2005) Philippines to a foreign country; 2. sale of raw
materials or packaging materials to a nonresident
*Under RA 7361, effective on the 4th quarter of the buyer for delivery to a resident local export-oriented
taxable year 2006 the 70% limit on creditable input tax enterprise; and
is no longer applicable. 3. foreign currency denominated sale;
4. processing, manufacturing or repacking goods for
17. TRANSITIONAL INPUT TAX AND other persons doing business outside the Philippines
PRESUMPTIVE TAX – SEC. 111(a) which goods are subsequently exported
(transactions subject to zero percent rate)
(a) Transitional Input Tax Credits on Beginning 5. services other than those mentioned in the
Inventories Taxpayers who became VAT-registered preceding paragraph rendered to a person engaged
persons upon exceeding the minimum turnover of P1, in business conducted outside the Philippines or to
919,500.00 in any 12-month period, or who voluntarily a nonresident person not engaged in business who
register even if their turnover does not exceed P1, is outside the Philippines when the services are
919,500.00 (except franchise grantees of radio and
performed;..the acceptable foreign currency
television broadcasting whose threshold is
exchange proceeds thereof had been duly
P10,000,000.00) shall be entitled to a transitional input
tax on the inventory on hand as of the effectivity of their accounted for in accordance with the rules and
VAT registration, on the following: regulations of the Bangko Sentral ng Pilipinas.
(1) goods purchased for resale in their present
condition;
In case of zero-rated sales under Secs. 106(A)(2)(a)(1)
(2) materials purchased for further processing, but
and (2), and Sec. 106(A)(2)(b) and Sec. 108(B)(1) and
which have not yet undergone processing;
(2) of the Tax Code, the payments for the sales must
(3) goods which have been manufactured by the
have been made in acceptable foreign currency duly
taxpayer;
accounted for in accordance with the BSP rules and 2. The total amount which the purchaser pays or is
regulations. obligated to pay to the seller with the indication that
Where the taxpayer is engaged in both zero-rated or such amount includes the value-added tax: Provided,
effectively zero-rated sales and in taxable (including That:
sales subject to final withholding VAT) or exempt sales a. The amount of the tax shall be shown as a
of goods, properties or services, and the amount of separate item in the invoice or receipt;
creditable input tax due or paid cannot be directly and b. If the sale is exempt from value-added tax, the
entirely attributed to any one of the transactions, only
term "VAT-exempt sale" shall be written or printed
the proportionate share of input taxes allocated to zero-
prominently on the invoice or receipt;
rated or effectively zero-rated sales can be claimed for
refund or issuance of a tax credit certificate. c. If the sale is subject to zero percent (0%) value-
In the case of a person engaged in the transport of added tax, the term "zero-rated sale" shall be written
passenger and cargo by air or sea vessels from the or printed prominently on the invoice or receipt;
Philippines to a foreign country, the input taxes shall be d. If the sale involves goods, properties or services
allocated ratably between his zero-rated sales and non- some of which are subject to and some of which are
zero-rated sales (sales subject to regular rate, subject VAT zero-rated or VAT-exempt, the invoice or receipt
to final VAT withholding and VAT-exempt sales). shall clearly indicate the breakdown of the sale price
between its taxable, exempt and zero-rated
In proper cases, the Commissioner shall grant a refund components, and the calculation of the value-added
or issue the tax credit certificate for creditable input tax on each portion of the sale shall be shown on the
taxes within one hundred twenty (120) days from the invoice or receipt: Provided, That the seller may issue
date of submission of complete documents in support of separate invoices or receipts for the taxable, exempt,
the application filed in accordance with Subsection (A) and zero-rated components of the sale.
hereof.
3. The date of transaction, quantity, unit cost and
description of the goods or properties or nature of the
In case of full or partial denial of the claim for tax credit service; and
certificate/refund as decided by the Commissioner of
Internal Revenue, the taxpayer may appeal to the Court
4. In the case of sales in the amount of one thousand
of Tax Appeals (CTA) within thirty (30) days from the
receipt of said denial, otherwise the decision shall pesos (P1,000.00) or more where the sale or transfer is
become final. However, if no action on the claim for tax made to a VAT-registered person, the name, business
credit certificate/refund has been taken by the style, if any, address and Taxpayer Identification
Commissioner of Internal Revenue after the one Number (TIN) of the purchaser, customer or client.
hundred twenty (120) day period from the date of
submission of the application with complete documents,
the taxpayer may appeal to the CTA within 30 days from Accounting Requirements
the lapse of the 120-day period. Notwithstanding the provisions of Sec. 233, all persons
subject to the value-added tax under Sees. 106 and
Refunds shall be made upon warrants drawn by the 108 shall, in addition to the regular accounting records
Commissioner or by his duly authorized representative required, maintain a subsidiary sales journal and
without the necessity of being countersigned by the subsidiary purchase journal on which the daily sales
Chairman, Commission on Audit, the provisions of the and purchases are recorded. The subsidiary journals
Administrative Code of 1987 to the contrary shall contain such information as may be required by
notwithstanding: Provided, That refunds under this the Secretary of Finance.
paragraph shall be subject to post audit by the
Commission on Audit. 20-21. FILING OF MONTHLY AND QUARTERLY VAT
RETURNS; PAYMENT OF VAT; RETURNA AND
19. INVOICING REQUIREMENTS PAYMENT OF VAT -
A VAT-registered person shall issue: Every person liable to pay the value-added tax imposed
1. A VAT invoice for every sale, barter or exchange under this Title shall file a quarterly return of the
of goods or properties; and amount of his gross sales or receipts within 25 days
2. A VAT official receipt for every lease of goods or following the close of each taxable quarter prescribed
properties, and for every sale, barter or exchange for each taxpayer: Provided, however, That VAT-
of services. registered persons shall pay the value-added tax on a
monthly basis.
Only VAT-registered persons are required to print their
TIN followed by the word “VAT” in their invoice or official
Any person, whose registration has been cancelled in
receipts. Said documents shall be considered as a “VAT
Invoice” accordance with Section 236, shall file a return and pay
or VAT official receipt. All purchases covered by the tax due thereon within twenty-five (25) days from
invoices/receipts other than VAT Invoice/VAT Official the date of cancellation of registration: Provided, That
Receipt shall not give rise to any input tax. only one consolidated return shall be filed by the
taxpayer for his principal place of business or head office
and all branches. (Sec 114[A])
Information Contained in the VAT Invoice or VAT
Official Receipt Where to File the Return and Pay the Tax
Except as the Commissioner otherwise permits, the
The following information shall be indicated in the VAT return shall be filed with and the tax paid to:
invoice or VAT official receipt: 1. An authorized agent bank,
2. Revenue Collection Officer or
1. A statement that the seller is a VAT-registered 3. Duly authorized city or municipal
person, followed by his Taxpayer's Identification Treasurer in the Philippines located within
Number (TIN); the revenue district where the taxpayer is
registered or required to register. (Sec. 114 [B])
22. WITHHOLDING OF FINAL VAT ON SALES TO d) payment of deficiency taxes inclusive of
GOVERNMENT penalties corresponding to the
understatement of taxable sales or receipts.
The following are mandated to deduct and withhold a
final VAT before making payment on account of each NOTE: The lifting of the Closure Order shall not
purchase of goods and services which are subject to VAT release the taxpayer from the compliance
imposed in Secs. 106 and 108 of the Code: requirements and from the penalties prescribed by
the Tax Code for the violation, which shall be dealt with
1. The Government; by criminal prosecution or by compromise settlement.
2. Any of its political subdivisions,
instrumentalities or agencies;
3. Including GOCCs;
The VAT withheld under this Section shall be remitted Applicable doctrines, principle or requisites:
within 10 days following the end of the month the Zero-Rated vs Effectively Zero-Rated Transactions
withholding was made. -Zero-rated transactions generally refer to the export
sale of goods and supply of services. Whereas,
23. BIR “OPLAN KANDADO” PROGRAM Effectively zero-rated transactions, however, refer to
the sale of goods50 or supply of services51 to persons or
Under this program, business operations of non- entities whose exemption under special laws or
compliant taxpayers will be suspended and their international agreements to which the Philippines is a
establishments will be temporarily closed if they signatory effectively subjects such transactions to a zero
will be found to have violated certain tax laws. rate.
“Oplan Kandado” aims to intensify the Bureau’s -In both transaction, results in no tax chargeable
enforcement operations through strict imposition of against the purchaser. The seller of such transactions
prescribed administrative sanctions for noncompliance charges no output tax,49 but can claim a refund of or a
with the basic tax requirements. tax credit certificate for the VAT previously charged by
suppliers.
Grounds:
Exempt Transaction vs Exempt Party
1. failure to issue receipts or invoices by a VAT- -exempt transaction involves goods or services which,
registered or registrable taxpayer; by their nature, are specifically listed in and expressly
2. failure to file a VAT return; exempted from the VAT under the Tax Code, without
3. understatement of taxable sales or receipts by 30% regard to the tax status -- VAT-exempt or not -- of the
or more of the correct amount thereof in the case of a party to the transaction. Whereas, exempt party, on the
VAT-registered or registrable taxpayer; other hand, is a person or entity granted VAT exemption
4. failure to register under the Tax Code, a special law or an international
agreement to which the Philippines is a signatory, and
NOTE: The closure of a business establishment shall by virtue of which its taxable transactions become
last for a period of not less than five (5) days, and exempt from the VAT
shall be in force until the violation is rectified by -In an exempt transaction is not subject to the VAT, but
the concerned taxpayer. the seller is not allowed any tax refund of or credit for
The suspension and temporary closure of business shall any input taxes paid. Whereas an exempt party is also
not preclude the BIR from filing the appropriate not subject to the VAT, but may be allowed a tax refund
charges under the Run After Tax Evaders (RATE) of or credit for input taxes paid, depending on its
Program of the Bureau, if evidence so warrants, registration as a VAT or non-VAT taxpayer.
against the taxpayer concerned or responsible officers
of the corporations (in case of corporate taxpayers). Note: Applying this principle to the case at bar, the
purchase transactions entered into by respondent are
The Closure Order shall only be lifted by the BIR not VAT-exempt.
when there has been:
Cross-border Principles- No VAT shall be imposed to
a) subsequent filing or amendment of returns form part of the cost of goods destined for consumption
with the payment of the tax inclusive of statutory outside of the territorial border of the taxing authority.
penalties;
b) subsequent registration with the payment VAT refund requirement:
of the corresponding compromise 1. Respondent is a VAT-registered entity;
penalties; 2. The input taxes paid on the capital goods of
c) payment of deficiency taxes inclusive of respondent are duly supported by VAT invoices and
penalties corresponding to the sales where no have not been offset against any output taxes; and
invoices/receipts have been issued; and 3. No question as to either the filing of such claims
within the prescriptive period or the validity of the VAT
returns has been raised.
special economic zone. The VAT on capital goods is an
Facts: internal revenue tax from which the respondent as an
SEAGATE TECHNOLOGY is a resident foreign entity is exempt. Although the transactions involving
corporation duly registered with the Securities and such tax are not exempt, respondent as a VAT-
Exchange Commission to do business in the Philippines, registered person, however, is entitled to their credits.
with principal office address at the new Cebu Township
One, Special Economic Zone, Barangay Cantao-an, Alternative Answer:
Naga, Cebu. Respondent, is registered with the Yes, respondent is entitled for a tax refund unutilized
Philippine Export Zone Authority (PEZA) and has been input VAT paid on capital goods purchased.
issued PEZA Certificate pursuant to Presidential Decree Effectively zero-rated transactions are the sale of goods
No. 66, as amended, to engage in the manufacture of or supply of services to persons or entities whose
recording components primarily used in computers for exemption under special laws or international
export. It is VAT (Value Added Tax)-registered entity as agreements to which the Philippines is a signatory
evidenced by VAT Registration Certification. VAT returns effectively subjects such transactions to a zero rate.
for the period 1 April 1998 to 30 June 1999 have been Which results in no tax chargeable against the
filed by respondent. An administrative claim for refund purchaser. The seller of such transactions charges no
of VAT input taxes in the amount of P28,369,226.38 output tax, but can claim a refund of or a tax credit
with supporting documents (inclusive of certificate for the VAT previously charged by suppliers.
the P12,267,981.04 VAT input taxes subject of this In the case at bar, respondent is entitled to the fiscal
Petition for Review), was filed on 4 October 1999 with incentives and benefits provided for in either PD 66 or
Revenue District Office No. 83, Talisay Cebu. The EO 226 for being a PEZA-registered enterprise within a
administrative claim for refund by the respondent on special economic zone. Since the purchases of
October 4, 1999 was not acted upon by the respondent are not exempt from the VAT, the rate to be
Commissioner, petitioner, prompting the respondent to applied is zero. Its exemption under both PD 66 and RA
elevate the case to the CTA. 7916 effectively subjects such transactions to a zero
rate, because the ecozone within which it is registered
Petitioner raised a Special and Affirmative Defenses, to is managed and operated by the PEZA as a separate
wit: customs territory.
An exempt party is a person or entity granted VAT Held: Yes, isolated transactions are subject to VAT.
exemption under the Tax Code, a special law or an
international agreement to which the Philippines is a Mindanao II’s sale of the Nissan Patrol is said to be an
signatory, and by virtue of which its taxable transactions isolated transaction. However, it does not follow that an
become exempt from the VAT. Such party is also not isolated transaction cannot be an incidental transaction
subject to the VAT, but may be allowed a tax refund of for purposes of VAT liability. Indeed, a reading of
or credit for input taxes paid, depending on its Section 105 of the 1997 Tax Code would show that a
registration as a VAT or non-VAT taxpayer. In relation, transaction "in the course of trade or business" includes
Under PD 66, a PEZA-registered enterprise within a "transactions incidental thereto."
special economic zone shall not be subject to internal
revenue laws and regulations for raw materials, In the cases relied by the petitioner, Commissioner of
supplies, articles, equipment, machineries, spare parts Internal Revenue v. Magsaysay Lines, Inc.
and wares, except those prohibited by law, brought into (Magsaysay)55 and Imperial v. Collector of Internal
the zone to be stored, broken up, repacked, assembled, Revenue (Imperial)56 decided under the NIRC of 1986,
installed, sorted, cleaned, graded or otherwise involved the sale of vessels of the National Development
processed, manipulated, manufactured, mixed or used Company (NDC) to Magsaysay Lines, Inc. the Court
directly or indirectly in such activities. ruled that the sale of vessels was not in the course of
NDC’s trade or business as it was involuntary and made
In the case at bar, respondent is entitled to the fiscal pursuant to the Government’s policy for privatization.
incentives and benefitsprovided for in either PD 66or EO
226 for being a PEZA-registered enterprise within a
In the course of its business, Mindanao II bought and reimbursement-on-cost basis only, without realizing
eventually sold a Nissan Patrol. Prior to the sale, the profit, for purposes of determining liability for VAT on
Nissan Patrol was part of Mindanao II’s property, plant, services rendered. As long as the entity provides service
and equipment. Therefore, the sale of the Nissan Patrol for a fee, remuneration or consideration, (in this case
is an incidental transaction made in the course of the " reimbursement-of-cost basis"), then the service
Mindanao II’s business which should be liable for VAT. rendered is subject to VAT.
Applicable doctrines, principle or requisites: (note: in the discussion, this paragraph was emphasized
-When the intent of the law is not apparent as worded, by sir: why is it in the case of Diaz, toll fees, the Court
or when the application of the law would lead to made a more broader coverage on the phrase "sale or
absurdity or injustice, legislative history is all important. exchange of services" which he (sir) did not explain but
In such cases, courts may take judicial notice of the I think ,as stated in the case:
origin and history of the law, the deliberations during To impose an unreasonable burden on cinema/theater
the enactment, as well as prior laws on the same houses operators or proprietors, who would be paying
subject matter to ascertain the true intent or spirit of an additional 10%55 VAT on top of the 30% amusement
the law. tax imposed by Section 140 of the LGC of 1991, or a
total of 40% tax.
Facts: Respondents SM Prime Holdings, Inc. (SM) and
First Asia Realty Development Corporation (First Asia) The power of taxation is sometimes called also the
are domestic corporations duly organized and existing power to destroy. Therefore, it should be exercised with
under the laws of the Republic of the Philippines. Both caution to minimize injury to the proprietary rights of a
are engaged in the business of operating cinema taxpayer. It must be exercised fairly, equally and
houses, among others. uniformly, lest the tax collector kill the "hen that lays
the golden egg." And, in order to maintain the general
The Bureau of Internal Revenue (BIR) sent SM Prime public's trust and confidence in the Government this
and First Asia a Preliminary Assessment Notice (PAN) power must be used justly and not treacherously.)
for value added tax (VAT) deficiency on cinema ticket
sales. In response, respondents filed a letter-protest.
The BIR denied the protest filed by respondents and 6. TAMBUNTING PAWNSHOP, INC.
ordered it to pay the VAT deficiency. vs.
COMMISSIONER OF INTERNAL REVENUE,
Respondents filed a Petition for Review before the CTA, G.R. No. 179085 January 21, 2010
which rendered judgment in favor of the respondents.
It ruled that the activity of showing cinematographic Facts:
films is not a service covered by VAT under the National Petitioner protested the assessment of tax
Internal Revenue Code (NIRC) of 1997, as amended, including VAT, it argued that Pawnshops are not
but an activity subject to amusement tax under RA 7160 included in the enumeration under sec 108 of the NIRC.
(LGC). Likewise , CTA En Banc affirmed CTA’s
judgment. CIR filed an appeal to the SC, arguing that Issue: W/N Pawnshops are subject to VAT?
cinema operators/proprietors are not exempt from law
(NIRC). Held: No, Pawnshops are not subject to VAT.
Issue: W/N ticket sales from operators or proprietors of Under R.A. No. 9238, pawnshops are classified as Other
cinema/theater houses are subject to VAT? Non-bank Financial Intermediaries. Furthermore, under
Sec. 109 par V of NIRC, Exempt transaction, Other Non-
bank Financial Intermediaries are exempted from VAT. Under the Tax Code, medical, dental, hospital and
In the case at bar, petitioner being classified as veterinary services except those rendered by
other non-bank financial intermediaries, are not subject professionals are exempt from VAT. However,
to VAT. PHILHEALTH is not actually rendering medical service
Note: the digest is short since this case focuses on the but merely acting as a conduit between the members
status of a pawnshop in relation to VAT imposition. The and their accredited and recognized hospitals and
case merely discuss the chronological imposition of VAT clinics. It merely provides and arranges for the provision
on pawnshop since there are some years that of pre-need health care services to its members for a
pawnshops are subject to VAT prior to the effectively of fixed prepaid fee for a specified period of time, its
RA 9238(2004). But as of 2004 pawnshops are exempt services are not VAT-exempt
from VAT.
The Court made its ruling base on the following
conclusions:
7. COMMISSIONER OF INTERNAL REVENUE a) Respondent "is not actually rendering medical service
vs. but merely acting as a conduit between the members
PHILIPPINE HEALTH CARE PROVIDERS, INC. and their accredited and recognized hospitals and
clinics."
G.R. No. 168129 April 24, 2007 b) It merely "provides and arranges for the provision of
pre-need health care services to its members for a fixed
(This case has the same discussion with the Medicard prepaid fee for a specified period of time."
Philippine case (case # 11) ,a CTA case, which discuss c) It then "contracts the services of physicians, medical
the tax implication on this kind of health provider and dental practitioners, clinics and hospitals to perform
scheme) such services to its enrolled members;" and
d) Respondent "also enters into contract with clinics,
Facts: hospitals, medical professionals and then negotiates
with them regarding payment schemes, financing and
The Philippine Health Care Providers, Inc. other procedures in the delivery of health services."
(PHILHEALTH), herein respondent, is a corporation
organized and existing under the laws of the Republic of
the Philippines. Pursuant to its Articles of 8. PHILIPPINE AMUSEMENT AND GAMING
Incorporation,2 its primary purpose is "To establish, CORPORATION (PAGCOR),
maintain, conduct and operate a prepaid group practice vs.
health care delivery system or a health maintenance THE BUREAU OF INTERNAL REVENUE (BIR)
organization to take care of the sick and disabled G.R. No. 172087 March 15, 2011
persons enrolled in the health care plan and to provide
for the administrative, legal, and financial Facts:
responsibilities of the organization." (you may go PAGCOR was created pursuant to Presidential Decree
directly to the issue) (P.D.) No. 1067-A on January 1, 1977. Simultaneous to
its creation, P.D. No. 1067-B (supplementing P.D. No.
CIR, through the VAT Review Committee of the Bureau 1067-A) was issued exempting PAGCOR from the
of Internal Revenue (BIR), issued VAT Ruling No. 231- payment of any type of tax, except a franchise tax of
88 stating that respondent, as a provider of medical five percent (5%) of the gross revenue. Thereafter, on
services, is exempt from the VAT coverage. June 2, 1978, P.D. No. 1399 was issued expanding the
scope of PAGCOR's exemption.
Meanwhile, on January 1, 1996 R.A. No. 7716
(Expanded VAT or E-VAT Law) took effect, amending National Internal Revenue Code of 1997, took effect.
further the National Internal Revenue Code of 1977. In Section 27 (c) of R.A. No. 8424 provides that
1999, BIR sent respondent a Preliminary Assessment government-owned and controlled corporations
Notice for deficiency in its payment of the VAT and (GOCCs) shall pay corporate income tax, except
documentary stamp taxes (DST) for taxable years 1996 petitioner PAGCOR. On May 24, 2005, certain sections
and 1997. Respondent filed a protest but CIR did not of the National Internal Revenue Code of 1997 were
take any action, which lead for the respondent to file a amended (RA 9337) excluding PAGCOR from the
Petition to Review before the CTA. enumeration of GOCCs that are exempt from payment
of corporate income tax of which the Court upheld its
CTA ordered the respondent to pay the deficiency VAT, constitutionality.
which respondent filed a Motion for Reconsideration.
CTA granted respondent's motion, which held that Subsequently, BIR issued RR No. 16-2005, specifically
petitioner is a service contractor subject to VAT since it identifying PAGCOR as one of the franchisees subject to
does not actually render medical service but merely acts 10% VAT
as a conduit between the members and petitioner's
accredited and recognized hospitals and clinics. Issue: W/N PAGCOR can be subject to VAT?
However, petitioner is entitled to the benefit of non-
retroactivity of rulings guaranteed under Section 246 of Held: No, PAGCOT cannot be subject to VAT
the Tax Code, in the absence of showing of bad faith on
its part. Since petitioner relied on VAT Ruling No. 231- Under P.D. 1869, the charter creating PAGCOR, grants
88 the latter an exemption from the payment of taxes.
Section 13 expressly provides that no tax of any kind or
Petitioner seasonably filed with the CA a petition for form, except Franchise Tax of five (5%) percent of the
review, but CA affirmed the CTA. gross revenue or earnings derived by the Corporation
from its operation under this Franchise. In the above
Issue: W/N PHILHEALTH is subject to VAT? provisos clearly gives PAGCOR a blanket exemption to
taxes with no distinction on whether the taxes are direct
Held: Yes, PHILHEALTH is subject to VAT. or indirect. Furthermore, under the Tax Code,
transactions which are exempt under international Facts:
agreements to which the Philippines is a signatory Petitioner Silicon Philippines, Inc., a corporation duly
or under special laws are exempt from tax. organized and existing under and by virtue of the laws
of the Republic of the Philippines, is engaged in the
The BIR exceeded its authority in subjecting PAGCOR to business of designing, developing, manufacturing and
10% VAT under RR No. 16-2005; hence, the said exporting advance and large-scale integrated circuit
regulatory provision is hereby nullified. components or "IC’s." Petitioner is registered with the
Bureau of Internal Revenue (BIR) as a Value Added Tax
Question: if PAGCOR will rent/lease an office or (VAT) taxpayer and with the Board of Investments
building, will PAGCOR be liable for the VAT passed (BOI) as a preferred pioneer enterprise.
on by its owner/lessor?
May 21, 1999, petitioner filed with the respondent
No, Services rendered to persons or entities whose Commissioner of Internal Revenue (CIR) an application
exemption under special laws or international for credit/refund of unutilized input VAT for the period
agreements to which the Philippines is a signatory October 1, 1998 to December 31, 1998 in the amount
effectively subjects the supply of such services to zero of ₱31,902,507.50. Due to the inaction of the
(0%) rate (emphasis supplied). respondent, petitioner filed a Petition for Review with
the CTA Division
The rationale for the exemption from indirect taxes
provided for in P.D. 1869 and the extension of such Division rendered a Decision partially granting
exemption to entities or individuals dealing with petitioner’s claim for refund of unutilized input VAT on
PAGCOR in casino operations are best elucidated from capital goods. Out of the amount of ₱15,170,082.00,
the 1987 case of Commissioner of Internal only ₱9,898,867.00 was allowed to be refunded because
Revenue v. John Gotamco & Sons, Inc., where the training materials, office supplies, posters, banners, T-
absolute tax exemption of the World Health shirts, books, and other similar items purchased by
Organization (WHO) upon an international agreement petitioner were not considered capital goods. With
was upheld. We held in said case that the exemption of regard to petitioner’s claim for credit/refund of input
contractee WHO should be implemented to mean that VAT attributable to its zero-rated export sales, the CTA
the entity or person exempt is the contractor itself who Division denied the same because petitioner failed to
constructed the building owned by contractee WHO, and present an Authority to Print (ATP) from the
such does not violate the rule that tax exemptions are BIR; neither did it print on its export sales invoices the
personal because the manifest intention of the ATP and the word "zero-rated.
agreement is to exempt the contractor so that no
contractor's tax may be shifted to the contractee WHO. Petitioner filed a Motion for Reconsideration contention
Thus, the proviso in P.D. 1869, extending the exemption that it is not required to show its BIR permit number on
to entities or individuals dealing with PAGCOR in casino the sales invoices runs counter to the requirements
operations, is clearly to proscribe any indirect tax, like under the said "Permit." This court also wonders why
VAT, that may be shifted to PAGCOR. petitioner was issuing computer generated sales
invoices during the period involved (October 1998 to
December 1998) when it did not have an authority or
9. SILICON PHILIPPINES, INC., (Formerly INTEL permit. Therefore, we are convinced that such
PHILIPPINES MANUFACTURING, INC.) documents lack probative value and should be treated
vs. as inadmissible, incompetent and immaterial to prove
COMMISSIONER OF INTERNAL REVENUE, petitioner’s export sales transaction.
G.R. No. 172378 January 17, 2011
All told, the non-presentation of the ATP and the failure Second, prior payment of taxes is not required to avail
to indicate the word "zero-rated" in the invoices or of the transitional input tax credit because it is not a tax
receipts are fatal to a claim for credit/refund of input refund per se but a tax credit. Tax credit is not
VAT on zero-rated sales. The failure to indicate the ATP synonymous to tax refund. Tax refund is defined as the
in the sales invoices or receipts, on the other hand, is money that a taxpayer overpaid and is thus returned by
not. In this case, petitioner failed to present its ATP and the taxing authority. Tax credit, on the other hand, is
to print the word "zero-rated" on its export sales an amount subtracted directly from one’s total tax
invoices. liability. It is any amount given to a taxpayer as a
subsidy, a refund, or an incentive to encourage
2. Credit/refund of input VAT on capital goods pursuant investment. Thus, unlike a tax refund, prior payment of
to Section 112 (B) of the same Code. taxes is not a prerequisite to avail of a tax credit.
We find no reason to deviate from the findings of the Lastly, the fact that FBDC acquired the Global City
CTA that training materials, office supplies, posters, property under a tax-free transaction makes no
banners, T-shirts, books, and the other similar items difference as prior payment of taxes is not a pre-
reflected in petitioner’s Summary of Importation of requisite.
Goods are not capital goods
Petition is denied Issue 2: W/N the transitional input tax credit applies
only to the value of improvements
10. FORT BONIFACIO DEVELOPMENT
CORPORATION, No. Section 4.105-1 of RR 7-95, insofar as it limits the
vs. transitional input tax credit to the value of
COMMISSIONER OF INTERNAL REVENUE and the improvement of the real properties, is a nullity. The
REVENUE DISTRICT OFFICER, REVENUE DISTRICT 8% transitional input tax credit should not be limited to
NO. 44, TAGUIG and PATEROS, BUREAU OF the value of the improvements on the real properties
INTERNAL REVENUE,
but should include the value of the real properties as d. Obligation to ensure compliance of lessees/tenants to
well. the following: presentation of
Hence, since FBDC is entitled to the 8% transitional TIN and Official Receipts/Sales or Commercial Invoice;
input tax credit which is more than sufficient to cover its submission of Information Statement on Privilege Store
output tax for the first taxable quarter, the amount of Activities indicating the duration (total number of days)
VAT output taxes erroneously paid must be refunded. of business operations and presentation of proof of
Issue 3: W/N the Tax Code allows either a cash refund payment of actual withholding tax due on its income
payment
or a tax credit for input VAT
e. Obligation to keep Books of Accounts and issue
Yes. First, a careful reading of Section 112 of the Tax
receipts
Code shows that it does not prohibit cash refund or tax f. Obligation to provide Cash Register Machines/Point-
credit of transitional input tax in the case of zero-rated of-Sale (CRM/POS) Machines for each privilege store
or effectively zero-rated VAT registered taxpayers, who operator, or centralized CRM/POS/Payment Centers, or
do not have any output VAT. allow the use of its own manual Official Receipts/Sales
or Commercial Invoices for the exclusive use by its
The phrase “except transitional input tax” in Section 112 Privilege Store Operators to monitor the sales of the
of the Tax Code was inserted to distinguish creditable latter
input tax from transitional input tax credit. Transitional g. Obligation to ensure the submission of List of Sales
input tax credits are input taxes on a taxpayer’s within 5 days after the privilege store operation
beginning inventory of goods, materials, and supplies h. Obligation to report to the BIR non-compliance by the
equivalent to 8% (then 2%) or the actual VAT paid on privilege store operators/lessees with their obligations
such goods, materials and supplies, whichever is higher. and responsibilities
It may only be availed of once by first-time VAT The obligations to the BIR of privilege store
operators are the following:
taxpayers. Creditable input taxes, on the other hand,
a. Obligation to deduct and withhold the Expanded
are input taxes of VAT taxpayers in the course of their
Withholding Tax on rental payments to
trade or business, which should be applied within two exhibitor/organizer for sub-leased spaces or
years after the close of the taxable quarter when the lessor/owner of leased property
sales were made. b. Obligation to file Income Tax returns
c. Obligation to submit Information Statement on
As regards Section 110, while the law only provides for Privilege Store Activities
a tax credit, a taxpayer who erroneously or excessively d. Obligation to keep Books of Accounts and issue
pays his output taxis still entitled to recover the receipts/sales or commercial invoices
payments he made either as a tax credit or a tax refund. e. Obligation to submit List of Sales on Privilege Store
Activities to the exhibitor/organizer
Here, since FBDC still has available transitional input tax The obligations to the BIR of lessees/tenants not
credit, it filed a claim for refund to recover the output classified as “Privilege Store Operators” (regular
VAT it erroneously or excessively paid for the 1st taxpayers) are the following:
quarter of 1997. Thus, there is no reason for denying its a. Obligation to deduct and withhold the Expanded
Withholding Tax on rental payments to
claim for tax refund/credit.
exhibitor/organizer for sub-leased spaces or
lessor/owner of leased property
b. Obligation to keep Books of Accounts and issue
PERTINENT RRs, RMCs, Rulings receipts/sales or commercial invoices
c. Obligation to file Income, Withholding, Business
RMC 39-2007 (Percentage or Value- Added) and other tax returns, and
Only the agency fee in the Security agency is subject to pay the correct amount of taxes
VAT. d. Obligation to file other information returns
A privilege store operator whose business operation/s is
RMC 34-2008, RMC 77-2008 more than 15 days ceases to be as such and shall
The compensation, honoraria, allowances and alike of thenceforth be governed by existing revenue laws and
the director who is not an employee is not subject to regulations applicable to regular taxpayers.
VAT since it does not fall within the meaning of in the
course of trade or business. The RDOs shall be primarily responsible in monitoring
compliance by the organizer/exhibitor of his/its
RMC 6-2009 obligations imposed herein and the activities of any
HMOs are subject to VAT and the basis for computing privilege store operating within their respective
the VAT shall be the membership fees received from the jurisdictions, as well as in validating the list furnished
members undiminished by any amount paid or payable by the exhibitor/organizer with respect to such
to owners/operators of hospitals, clinics and medical information regarding the identity of the participants,
and dental practitioners. the number of participants and the duration of the
exhibit. The validation of the participants, as reported
RR 16-2013 by the exhibitor/organizer, shall be made through the
The obligations to the BIR of exhibitor or BIR’s existing registration system.
organizer are the following:
a. Obligation to post in a conspicuous place the Based on the list provided by the exhibitor/organizer,
Certificate of Registration of the organizer issued by the the RDO shall recommend the issuance by the Regional
BIR Director of Mission Order/s directing the deployment of
b. Obligation to deduct and withhold Expanded Revenue Officers (ROs) who shall be in-charged of
Withholding Tax on lease payments to the lessor of real physically checking compliance by the
property exhibitor/organizer, privilege store operators and
c. Obligation to provide the Revenue District Office regular taxpayers with their obligations as enumerated
(RDO) with the list of names, residence addresses, stall, above, particularly the filing of tax returns (i.e. Income
slot or unit number in the privilege store outlet, location Tax returns, Percentage or Value-Added Tax returns,
site of the privilege store outlet, individual Taxpayer etc.).
Identification Number (TIN) of persons/entities
participating in the event or exhibit and the specific RMC. 55-2014
dates and duration when such operations shall be
conducted
Sec.4.109-1- VAT Exempt Transactions.- c. Registration of Books of Accounts (e.g. two-column
journal or other simplified books for daily expenses and
xxxxxx revenues);
To give effect to the legislative intent that only livestock d. Online Auction
and poultry feeds or ingredients used in the
manufacture of finished feeds are exempted from VAT, Like any other business establishments, persons who
it is hereby clarified that the sale or importation of conduct business through online transactions and its
ingredients which may also be used for the production permutations have the following obligations:
of food for human consumption shall be subject to VAT.
Thus, for the sale or importation of livestock and poultry a) Register the business at the Revenue District
feeds or ingredients used in the manufacture of finished Office (RDO) having jurisdiction over the
feeds to be exempt from VAT, there must be a showing principal place of business/head office (or
that the same is unfit for human consumption or that residence in case of individuals) by
the ingredient cannot be used for the production of food accomplishing BIR Form 1901 (for individuals)
for human consumption as certified by the Food and or 1903 (for corporations or partnerships) and
Drug Administration (FDA). paying the registration fee to any Authorized
Agent Bank (AAB) located within the RDO.
RMC 7-2014
b) Secure Authority to Print (ATP)
Marginal Income Earner is an individual not deriving invoices/receipts and register books of accounts
compensation as an employee under an employer- for use in business, which may either be: a)
employee relationship but who is self-employed and manual books of accounts, booklets of
deriving gross sales or receipts not exceeding P 100,000 invoices/receipts, accounting records or loose-
in any 12-month period. Moreover, the activities of MIE leaf of such; or b) Computerized
should be principally for subsistence or livelihood. Accounting System and/or its components
including e-Invoicing System.
The MIE shall include but not limited to agricultural
growers/producers (farmers/fishermen) selling directly c) Issue registered invoice or receipt, either
to ultimate consumers, small sari-sari stores, small manually or electronically, for every sale,
carinderias or “turo-turos”, drivers/operators of a single barter, exchange or lease of goods and
unit tricycle, and such, but shall not include licensed properties, as well as for every sale, barter, or
professionals, consultants, artists, sales agents, brokers exchange of service, following the information
and others similarly situated, including all others whose requirements prescribed under existing revenue
income have been subjected to withholding tax. issuances.
The incidence of being a MIE, as required under RR No. d) Withhold required creditable/expanded
7-2012, covers the following privileges and minimum withholding tax, final tax, tax on compensation
registration and tax compliance requirements: of employees and other withholding taxes and
a. Registration with the BIR using BIR Form 1901 with remit the same to the BIR at the time or times
the following minimal documentary requirements: required, and issue to the concerned payees the
necessary Certificate of Tax Withheld.
i. Sworn Statement of Income for the year; and
e) File applicable tax returns on or before the due
ii. National Statistics Office Certified or Local Civil dates, pay correct internal revenue taxes and
Registry Birth Certificate; submit information returns and other tax
compliance reports such as the Summary List of
b. Exemption from the payment of Annual Registration Sales/Purchases, Annual Alpha List of Payees,
Fee; etc., at the time or times required by existing
rules and regulations; and A professional is liable to Percentage Tax at the rate of
3% if his gross receipts/professional fees for the past 12
f) Keep books of accounts and other months is equal to or is below P1,919,500.00 and he is
business/accounting records within the time not a VAT-registered person.
prescribed by law, which should be made
available anytime for inspection and verification If the professional registers as a VAT-person, he shall
by duly authorized Revenue Officer/s for the be liable to VAT upon registration as VAT taxpayer and
purpose of ascertaining compliance with tax not to Percentage Tax, irrespective of the amount of his
rules and regulations. gross receipts/professional fees. A professional who is
not required to register for VAT may elect to be VAT-
The existing tax laws and revenue issuances on the tax registered but he shall not be allowed to cancel such
treatment of purchases (local or imported) and sale registration for the next 3 years counted from the
(local or international) of goods (tangible or intangible) quarter when the election was made.
or services shall be equally applied with no distinction
on whether or not the marketing channel is the
internet/digital media or the typical and customary RR 13-2012
physical medium.
"Section 4.106-3 Sale of Real Properties. - Sale of real
The specific obligations and duties/basic compliance of properties held primarily for sale to customers or held
parties to different types of online transactions (whether for lease in the ordinary course of trade or business of
payment is thru credit card companies, thru banks, or the seller shall be subject to VAT.
cash on delivery or in the office of merchant) are
specified in the Circular. xxxxxxxxx
Any person engaged in internet commerce who fails to This includes sale, transfer or disposal within a 12-
comply with applicable tax laws, rules and regulations month period of two or more adjacent residential lots,
shall be subject to the imposition of penalties provided house and lots or other residential dwellings in favor of
for under the existing laws, rules and regulations, in one buyer from the same seller, for the purpose of
addition to the imposition of penalties pursuant to the utilizing the lots, house and lots or other residential
applicable Section/s under Chapters II and IV, Title X of dwellings as one residential area wherein the aggregate
the National Internal Revenue Code of 1997, as value of the adjacent properties exceeds P
amended. 1,919,500.00, for residential lots and P 3,199,200.00
for residential house and lots or other residential
RMC 75-2012 dwellings. Adjacent residential lots, house and lots or
In order to be exempted from VAT, a newspaper, other residential dwellings although covered by
magazine, review or bulletin must be: separate titles and/or separate tax declarations, when
(i) printed or published at regular intervals; (ii) available sold or disposed to one and the same buyer, whether
for subscription and sale at fixed prices; covered by one or separate Deed/s of Conveyance, shall
and (iii) are not principally devoted to the publication of be presumed as a sale of one residential lot, house and
paid advertisements. lot or residential dwelling.
The terms “book”, “newspaper”, “magazine”, “review” This however, does not include the sale of parking lot
and ”bulletin”, as used in the said provision, refer to which may or may not be included in the sale of
printed materials in hard copies. They do not include condominium units. The sale of parking lots in a
those in digital or electronic format or computerized condominium is a separate and distinct transaction and
versions, including but not limited to e-books, e- is not covered by the rules on threshold amount not
journals, electronic copies, online library sources, CDs being a residential lot, house & lot or a residential
and software. dwelling, thus, should be subject to VAT regardless of
amount of selling price.”
RMC 65-2012
For tax purposes, the association dues, membership RMC 35-2012
fees and other assessment/charges collected by a The income of recreational clubs from whatever source,
condominium corporation constitute income payments including but not limited to membership fees,
or compensation for the beneficial services it provides assessment dues, rental income and service fees are
to its members and tenants. subject to Income Tax.
Accordingly, the gross receipts of condominium Any person regardless of whether or not the person
corporations including association dues, membership engaged therein is a non-stock, nonprofit private
fees and other assessments/charges are subject to VAT organization or government entity” is liable to pay
and Income Tax, and income payments made to it are Value-Added Tax (VAT) on the sale of goods or services.
subject to applicable withholding taxes under existing The gross receipts of recreational clubs including but not
regulations. limited to membership fees, assessment dues, rental
income, and service fees are subject to VAT
RMC 64-2012
Apart from applicable Income Taxes and Withholding RR 7-2012
Taxes, a professional is liable to Value-Added Tax (VAT)
at the rate of 12% if his gross receipts/professional fees issued on April 2, 2012 amends the consolidated
for the past 12 months is more than P1,919,500.00. A Revenue Regulations on primary registration, updates
professional is likewise liable to register as a VAT- and cancellation, particularly on the following:
taxpayer if there are reasonable grounds to believe that
his gross receipts/professional fees for the next 12 a. Registration, updates and cancellation procedures;
months will exceed P1,919,500.00. If he fails to
register, he shall be liable to pay the 12% output tax b. Venue, Forms & Documentary Requirements;
under Section 108 of the 1997 Tax Code, as amended,
as if he were a VAT-registered person, but without the c. Annual Registration Fee;
benefit of input tax credits for the period in which he
was not properly registered. d. Certification Fee; and
e. Penalties for registration-related violations. process with the concerned Local Government Unit
(LGU), a duly stamped “Received” application for
The venue, forms and documentary requirements for Mayor’s Permit will temporarily suffice to qualify him/
the registration of each type of applicant-taxpayer are her/ it for registration, provided, further that a duly
listed in Annex “A” of the Regulations. Application for approved permit shall be submitted within 30 calendar
Taxpayer Identification Number (TIN) with incomplete days from date of registration. Failure to submit the
documentary requirements shall not be processed. same shall subject the taxpayer to Tax Compliance
Verification Drive/ocular inspection to be conducted by
The TIN, once assigned to a particular taxpayer, is non- the BIR district office.
transferable and there shall be no instance where two
or several taxpayers are holders of the same TIN. Only Consequently, if upon validation it can be determined
one TIN shall be assigned to the taxpayer, regardless of that the business is non-existent and fails to file
variety of transactions e.g. employee who is at the same regularly the tax returns/declarations for his/her/its
time engaged in business. Once assigned with a TIN, a registered tax types, the BIR district officeshall observe
taxpayer is precluded from applying for another TIN, the procedures on tagging of the taxpayer’s status as
except for banks with both Regular Banking Unit and “Inactive”.
with Foreign Currency Deposit Unit where each unit is
assigned with different TINs. Any person who shall Business taxpayers and those required to issue receipts,
secure more than one TIN shall be subject to the penalty shall submit the following requirements to complete
prescribed under Section 15 of the Regulations. their registration:
The estate of a deceased person or a trust under an a. Application for Authority to Print (ATP)
irrevocable trust agreement shall be issued a TIN Receipts/Invoices;
separate and distinct from the TIN of the deceased
person and/or trustee. b. Registration of Manual Books of Accounts; or
Minors who are earning and/or who are under the c. Application for Permit to use Computerized
circumstances prescribed under Executive Order (EO) Accounting System (CAS) or components thereof, if
No. 98, series of 1998 shall be supplied with TIN. applicable;
Non-Resident Aliens Not Engaged in Trade or Business d. Application for Permit to use Loose Leaf Accounting
(NRANETB) or Non-Resident Foreign Corporations Records, if applicable;
(NRFC) shall be issued TINs for purposes of withholding
taxes on their income from sources within the e. Application for Permit to use Cash Register Machine
Philippines. The withholding agent shall apply for the (CRM)/Point of Sales (POS)
TIN in behalf of the NRANETB or NRFC prior to or at the
time of the filing of their monthly Withholding Tax Machines, and the like, if applicable;
Return as applicant under EO 98, Series of 1998.
f. Permit to Operate for taxpayers engaged in
Branches of identified Large Taxpayer shall be activities/transactions involving products subject to
registered at the Large Taxpayers Service (LTS) where excise taxes.
the Head Office (HO) is registered. All incorporators of
corporations/associations (stock and non-stock), As a general rule, it shall be mandatory for the BIR
partners of partnerships and members of cooperatives district office to process and issue simultaneously the
must have TINs. Certificate of Registration (COR), ATP and register the
While the application and issuance of TIN is generally books of accounts of business taxpayers immediately
made through the concerned BIR district office, the after registration and upon complete submission of the
same, upon certain circumstances provided for by requirements within the period prescribed under the
existing rules and regulations, may be obtained either existing process provided by the BIR Citizen’s Charter.
through the e-REG facility in the BIR website, or through The BIR district office must ensure that taxpayers will
the Security and Exchange Commission or through other be issued their registration certificates/permits (COR,
facilities/agencies as may be made available in the ATP, Books of Accounts) upon commencement of their
future. business.
Applicants whose TINs have been secured through the Issuance of TIN Card for the first time shall be free of
e-REG facility shall complete their registration with the charge subject to the provisions of Section 15 of the
BIR district office (e.g. persons to engage in Regulations. The same must be processed and released
business/practice of profession), but shall no longer be to the applicant within the same day upon submission
required to fill out the forms for “Application for to the BIR district office of complete documentary
Registration”. Instead, a printout of the “System requirements after the cut-off period of 1:00 p.m. TIN
Confirmation Page” and the filled out on-line “BIR Form Cards shall be automatically issued to registered
1901”, which is the proof of e-TIN registration, shall be taxpayers except those TINs issued under EO 98, series
submitted to the concerned BIR district office, together of 1998/ONETT wherein issuance of the TIN card is
with the prescribed documentary requirements. optional and only upon request to the BIR district office
where the taxpayer is registered.
In the case of corporations/partnerships (including
GOCCs), which upon registration with the SEC has For eREG applicants who are employees or those
already been assigned with a TIN, the “Application for registered under EO 98 whose TIN are generated by
Registration” (BIR Form 1903) shall be completed and Employers/Authorized Users, the “System Confirmation
submitted to the BIR district office which has jurisdiction Page” and filled out online BIR Form 1902/BIR Form
over its principal place of business. The articles of 1904T shall be presented to the concerned BIR district
incorporation, together with the SEC Registration office for the issuance of the TIN card. The concerned
Certificate where the TIN is indicated, as well as proof BIR district office shall only issue the TIN card upon
of authority given to its representative must be submission of the documents prescribed in Annex "A" of
submitted to the concerned BIR district office during the the Regulations
completion of registration of its business. The
submission of a Mayor’s Permit prior to registration is The cost of processing of the initial TIN Card shall not
mandatory. Provided, however, that if it is still in be charged and collected from the applicant.
Subsequent requests for the issuance of TIN Card due to the public.
to loss or damage shall be charged with a fee amounting
to P100.00, subject to change upon evaluation and An ARF in the amount of P 500.00 for every HO and/or
approval of the Commissioner of Internal Revenue branch shall be paid upon registration and every year
(CIR), to cover cost of reprinting. Applications for TIN thereafter on or before January 31. However, the
Card of registered taxpayers can be made at any following shall be exempt from the imposition of ARF:
computerized BIR district office regardless of registered
address of applicant. a. Cooperatives duly registered with the Cooperative
Development Authority;
Individuals engaged in business or practice of profession
and juridical entities, unless otherwise exempted, shall: b. Individual residents earning purely compensation
income
a. Pay Annual Registration Fee (ARF), if applicable;
c. OCWs/OFWs;
b. Secure COR;
d. Marginal Income Earners;
c. Proceed to Secondary Registration;
e. GAIs, in the discharge of their governmental
d. Get “Ask for Receipt” notice, if applicable; and functions;
e. Attend the taxpayer’s initial briefing to be conducted f. LGUs, in the discharge of their governmental
by the BIR district office for new registrants in order to functions;
apprise them of their rights and duties/responsibilities.
In lieu of the briefing, the BIR district office may g. Tax exempt corporations such as those enumerated
distribute information materials on registration to its under Section 30 of the Code, as amended, in pursuance
new applicants in CD format to be developed by the of tax-exempt activities;
Taxpayer Assistance Service.
h. Non-stock/non-profit organizations not engaged in
Every person subject to any internal revenue tax to be business;
filed/paid periodically shall complete its registration with
the BIR as follows: i. Persons subject to tax under one-time transactions;
a. For self-employed individuals, estates and trusts,
corporations and their branches, if any j. Persons registered under EO 98, series of 1998; and
– on or before the commencement of business
k. Facility/ies where no sales transactions occur.
b. For corporations (Taxable or Non-taxable)/ONETT –
before payment of any tax due Any profit-oriented activity pursued by GAIs, LGUs
and/or tax-exempt entity, which partakes the nature of
c. For partnerships, associations, cooperatives, an activity similar to those undertaken by those
Government Agencies and Instrumentalities engaged in business shall be treated as an activity in
(GAIs) – before or upon filing of any applicable tax pursuance of a business for which the payment of ARF
return, statement or declaration as must be imposed.
required by the Code, as amended
The ARF shall likewise be paid in cases where parts of
d. For employees or individuals who are registering with the activities or undertakings conducted in a facility of
the BIR for the first time by the business involve sales transactions regardless of the
reason of employment – within 10 days from date of frequency of the occurrence thereof.
employment
The ARF shall be paid, in full amount, to an Authorized
e. For individuals required to secure TIN for their Agent Bank (AAB) located within the BIR district office
transactions with government agencies (applications or to the Revenue Collection Officer (RCO) or duly
under EO 98, series of 1998) – they shall apply for their authorized Treasurer of the City or Municipality where
TIN from any BIR district office (thru the eREG System) each place of business or branch is registered, or thru
at any time before they complete their transaction with the BIR accredited payment facilities such as Electronic
the government agency Filing and Payment System (EFPS) and G-Cash.
Payment of ARF shall be made thru EFPS for taxpayers
The COR shall only be issued to individuals engaged in mandated to use EFPS such as Large
business or practice of profession and to juridical
persons (whether taxable or exempt) by the BIR district Taxpayer, Top 20,000 Corporations, Top 5,000
office concerned (i.e., BIR district office of Individuals, etc. for their respective HO and Branches.
HO/Branch/Facility) upon compliance with the Registration occurring during the interim period of the
requirements for registration. Issuance of COR, whether initial year shall be imposed with the same full amount
upon registration or upon update of taxpayer’s of P 500.00 as ARF.
information, is not subject to payment of Certification
Fee unless the taxpayer requested for a certified copy When any individual who has paid the ARF dies, and the
of said COR, in which case, the same shall be subject to same business is continued by the person or persons
the payment of Certification Fee. interested in his estate, those continuing the business
should register as a separate entity reflecting in said
Employees, ONETT taxpayers, and/or persons who have registration that it is pursuing the business enterprise
secured a TIN under EO 98, series of 1998 with the BIR as heirs of the estate of the decedent. Accordingly, the
shall not be issued a COR. On the other hand, each HO person or persons interested in the estate should, within
and/or branch shall be issued with a COR within the 30 days from the death of the decedent, submit to the
period/time prescribed under the existing “BIR Citizens concerned BIR district office inventories of goods or
Charter”.Persons issued with COR shall post or exhibit stocks at the time of death of the registered individual
his/its original COR and duly validated ARF Return at upon registration and the ARF should be paid. This
his/its principal place of business and at each branch requirement shall also be applicable in the case of
and/or facility in a way that is clearly and easily visible transfer of ownership or change of name of the business
establishment. The rules in determining the proper tax type of a
taxpayer (i.e., whether VAT or other Percentage Taxes)
Every person, who is required to register with the BIR are specified in the Regulations.
under Section 4 of the Regulations, shall register each
type of internal revenue tax for which he/it is obligated In case a registered person transfers his registered
to file a return or pay taxes due thereon. Such person address to a new location, it shall be his duty to inform
shall update the BIR for any changes in his/its the BIR district office where he is registered of such fact
registration information. by filing the prescribed
Generally, registration of tax types by a business entity BIR Form specifying therein the complete address where
consists of but not limited to the following internal he intends to transfer. The guidelines relative to transfer
revenue taxes/fees: of registration of non-business individuals, local
employees and taxpayers engaged in business or
a. Income tax; practice of profession (individual/non-individual) are
specified in the Regulations.
b. Value-Added Tax (VAT) and/or Percentage Tax;
The new BIR district office of the transferred taxpayer
c. Withholding tax on compensation; shall issue the COR immediately after the transfer of the
taxpayer’s registration by the old BIR district office. The
d. Creditable Withholding Tax at source on certain COR, Sales Invoice/Official Receipt (SI/OR) used in the
income payments; old business location can still be used in the new
business location without penalty, until a new COR and
e. Final Withholding Tax on certain income payments; ATP is issued by the new BIR district office; provided
that the taxpayer can show a copy of duly received
f. Documentary Stamp Tax; update form filed with the old BIR district office;
provided further that the taxpayer shall stamp the new
g. Excise tax; and address on the old SI/OR when the same is to be issued
in the new business address. In cases all the SI/OR are
h. Annual Registration Fee. consumed prior to the online transfer of its records in
the BIR’s ITS database, the taxpayer shall still apply
The nature of the business to which the taxpayer with the old BIR district office for an ATP for the new
belongs shall be taken into consideration in determining sets of receipts/invoices. The filing of tax returns and
the type of taxes that must be registered. payment of taxes to the new BIR district office shall
commence following the issuance of the new COR. The
In order to avoid the generation of invalid “stop-filer” new BIR district office shall be responsible for notifying
cases in the BIR’s database, only those tax types, which the taxpayer concerned that the transfer of registration
the taxpayer is expected to regularly/periodically file the has already been completed.
return and/or pay the tax shall be registered. In case a
taxpayer fails to update his tax types prior to Any person registered in accordance with Section 4(2)
filing/payment of a tax return, the duly authorized BIR of the Regulations shall, whenever applicable, update
personnel must register the corresponding tax type for his registration information with the BIR district office
the Tax Return to be filed/paid except for VAT and/or where he is registered using BIR Form/s prescribed by
Percentage Taxes, which must be applied for by the the BIR. The instances when a taxpayer must update his
taxpayer. The BIR personnel initiating the update in registration information include (but are not limited to)
behalf of the taxpayer must inform him of such update, the following:
in writing, to give due notice on his obligation to
subsequently file the return on a regular basis on or a. A change in the nature of the business from sale of
before the prescribed deadline for filing. taxable goods and/or services to being VAT-exempt;
The registration of Income Tax as a tax type does not b. A person whose transactions are exempt from VAT
automatically carry with it the registration of VAT and/or but voluntarily registered under the VAT system, and
Percentage Tax as a covered/registered tax type. For after the lapse of 3 years after his registration applies
marginal income earners, the activities of such for cancellation of his VAT registration. However, the
individuals are considered principally for subsistence or optional registration as a VAT taxpayer of a franchise
livelihood. grantee of radio and/or television broadcasting whose
gross receipts for the preceding year did not exceed P
Moreover, they are not required to pay any ARF 10,000,000.00 shall be irrevocable;
although they are required to register as taxpayers for
being potential Income and Withholding Tax filers. For c. A VAT-registered person whose gross sales or receipts
purposes of registration, they will be registered for the for 3 consecutive years did not exceed the amount of P
tax type Income Tax and Form Type 1701. 1,919,500.00; Provided, That every 3 years thereafter,
Notwithstanding their exemption from business taxes the amount therein stated shall be adjusted to its
and ARF, they are liable to pay Income Taxes similar to present value using the Consumer Price Index, as
any other individual engaged in business or practice of published by the National Statistics Office (NSO);
profession, after applying the allowable deductions Provided further, that such adjustment shall be
against their Gross Income/Sales/Receipts and published through Revenue Regulations to be issued not
personal/additional exemptions granted under the Tax later than March 31 of each year. Upon updating his
Code. registration, the taxpayer shall become liable to the
Percentage Tax imposed under Section 116 of the Code,
For those enjoying Income Tax holidays, or exemption as amended. A short period return for the remaining
from other taxes for a limited time, as granted pursuant period that he was VAT-registered shall be filed within
to special laws, the type of taxes the taxpayer is exempt 25 days from the date of cancellation of his VAT
from paying on the account thereof, the effectivity and registration as a tax type and at the same time register
expiry date shall be indicated. However, upon expiration for Percentage Tax as his new tax type; and
thereof, it shall be the duty of the taxpayer to update
his/its registration and/or the BIR district office must be d. Any other changes/updates in registration
duly informed in writing. information previously supplied, including cancellation
or change in any tax types. collected on each set of documents regardless of the
number of pages of such document.
The cancellation of business registration of an individual
shall not automatically cancel his TIN. The TIN shall The following violations related to primary registration
remain active subject to subsequent updates on his shall be penalized as follows:
registration. In this case, the BIR district office shall end
date the particular registered form/tax type of such a. Failure to register (those who are found unregistered
taxpayer in the ITS database upon complete submission during TCVD – subject to the penalties under prevailing
of the requirements for cancellation of business revenue issuances
registration. If subsequently, such taxpayer engages in
a taxable activity (e.g. employment or establishment of b. Late Registration (those who are voluntary
a new business), the concerned BIR district office shall registering, but beyond the prescribed period as
make the necessary updates on the registration records indicated in these Regulations) – compromise penalty of
of such taxpayer corresponding to his new activity. P 1,000.00, in addition to the unpaid ARF and penalties
In the case of juridical entities, the BIR district office due thereon for every year that the business is in
shall prepare a monthly list of nonindividual taxpayers operation. This provision shall not apply to application
filing for cancellation of business registration for for TIN of employees
submission to the Assistant Commissioner – Information
Systems Operations Service, through the Revenue Data c. Late payment of ARF – subject to 25% surcharge and
Centers (RDC), for purposes of tagging said taxpayers 20% interest per annum and P 200.00 penalty
as “Inactive”. Once tagged as “Inactive”, such taxpayer
shall no longer be included in the roster of active d. Failure to register a branch or facility – subject to
taxpayers under the concerned BIR district office. penalty of P 1,000.00 per unregistered branch or facility
In the case of TIN issued to an estate of a decedent e. Acquisition of Multiple TINs – aside from the criminal
under ONETT, upon full payment of the Estate Tax by liability that may be imposed, P 1,000.00 for every TIN
the heirs, administrator or executor, the issued TIN of acquired in excess of one
the estate shall be tagged as “Inactive”. The tagging of
said taxpayer as inactive shall be coursed through the f. Failure to and/or erroneous supply of information – P
RDC of concerned BIR district office. However, in case 1,000.00 for every error/omission, but not to exceed P
of additional properties discovered after payment of the 25,000.00
Estate Tax, the TIN previously issued for such estate
shall be updated to “Active” status in order to facilitate g. Any violation of the provisions of these Regulations
the filing of the amended Estate Tax Return and shall be shall be subject to penalties provided under Sections
cancelled upon full settlement of the tax liabilities of the 254 and 275, and other pertinent provisions of the
estate. Code, as amended.
Registered taxpayers who failed to file any tax return Portions of the Regulations, which can be implemented
for 2 consecutive years or more shall be tagged as immediately given the present capabilities of the BIR
“Inactive” and an investigation shall be initiated. As Registration System shall strictly be complied with upon
such, upon classification as Inactive, all CRM/POS the effectivity of the Regulations. Nevertheless, for
Permits issued to them as well as any unused Official provisions hereof, which can only be implemented as
Receipts/Invoices for which a valid ATP has been the enhancements are put in place in the registration
previously granted, shall be deemed database, transitory procedures shall be provided in a
cancelled/invalidated as of date of tagging. separate Revenue Memorandum Order to be issued for
the purpose. Pending the issuance of transitory
Provided that the Inactive self-employed individual is procedures, existing rules and procedures (status quo)
not likewise employed, non-filing of tax return shall shall be observed in the meantime.
qualify him for tagging as Inactive. Where such taxpayer
is also registered as an employee, he or she will not be RR 10-2011
tagged as Inactive but any unused Official
Receipts/Invoices, for which a valid ATP has been Based on the amendment to Section 4.106-8 of RR No.
previously granted for his or her business, shall be 16-2005, the VAT shall not apply to goods or properties
deemed cancelled/invalidated upon “end-dating” of its which are originally intended for sale or for use in the
registered business tax types. course of business existing as of the occurrence of the
following:
The cancellation of registration may either pertain to
cancellation of business registration and/or the assigned a. Change of control of a corporation by acquisition of
TIN. Application for TIN/Registration cancellation shall the controlling interest of such corporation by another
take place upon stockholder (individual or corporate) or group of
stockholders.
a. Death of individual;
The goods or properties used in business (including
b. Full settlement of the tax liabilities of the estate; those held for lease) or those comprising the stock in
trade of the corporation having a change in corporate
c. Discovery of a taxpayer having multiple TINs; and control will not be considered sold, bartered, or
exchanged despite the change in the ownership interest
d. Dissolution, merger or consolidation of juridical in the said corporation.
person.
However, the exchange of goods or properties including
Any request for certification that may be requested by a the real estate properties used in business or held for
taxpayer from the BIR district office where he is sale or for lease by the transferor, for shares of stocks,
registered on matters relating to his registration shall whether resulting in corporate control or not, is subject
be charged with a fee in an amount not exceeding P to VAT.
100.00, in addition to the Documentary Stamp Tax
imposed under Section 188 of the Code, as amended, b. Change in the trade or corporate name of the
subject to change upon approval of the CIR thru a business;
subsequent issuance. The Certification Fee shall be
c. Merger or consolidation of corporations. The unused b. The 7.5% FWT on interest income from a depository
input tax of the dissolved corporation, as of the date of bank under the expanded foreign By management
merger or consolidation, shall be absorbed by the accounts and other investments evidenced by
surviving new corporation. certificates in such form prescribed by the Bangko
Sentral ng Pilipinas before the fifth year, he shall be
RR 8-2010 subject to the FWT imposed on the entire income
issued on September 3, 2010 amends Revenue depending on the following holding period of the deposit
Regulations No. 7-2010 implementing the tax privileges or investment. If held for a period of:
provisions of Republic Act No. 9994, otherwise known
as the “Expanded Senior Citizens Act of 2010”, by • Four years to less than five years — 5%
excluding the special discounts on electric and water
consumption of senior citizens from exemption from the • Three years to less than four years — 12%; and
ValueAdded Tax (VAT).
• Less than three years — 20%
RR 7-2010
Qualified Senior Citizens deriving returnable income d. The 10% FWT –
during the taxable year, whether from compensation or i. On cash and/or property dividends actually or
otherwise, are required to file their Income Tax Returns constructively received from a domestic corporation or
(ITR) and pay the tax as they file the return. However, from a joint stock company, insurance or mutual fund
if the returnable income of a Senior Citizen is in the company and a regional operating headquarters of a
nature of compensation income but he qualifies as a multinational company; or
minimum wage earner under RA No. 9504, he shall be
exempt from Income Tax (IT) on the said compensation ii. On the share of an individual in the distributable net
income subject to the rules applicable to minimum wage income after tax of a partnership (except a general
earners. professional partnership) of which he is a partner; or
Likewise, if the aggregate amount of gross income iii. On the share of an individual in the net income after
earned by the Senior Citizen during the taxable year tax of an association, a joint account, or a joint venture
does not exceed the amount of his personal exemptions or consortium taxable as a corporation of which he is a
(basic and additional), he shall be exempt from IT and member or a co-venturer.
shall not be required to file an ITR upon compliance with
the following requirements: e. Capital Gains Tax from sales of shares of stock not
traded in the stock exchange; and
a. A Senior Citizen must first be qualified as such by the
Commissioner of Internal Revenue or his duly f. The 6% FWT on presumed capital gains from sale of
authorized representative (i.e., the Revenue District real property, classified as capital asset, except capital
Officer (RDO) having jurisdiction over the place where gains presumed to have been realized from the sale or
the Senior Citizen resides), by submitting a certified true disposition of principal residence.
copy of his Senior Citizen Identification Card (OSCA ID)
issued by the OSCA of the city or municipality where he A Senior Citizen shall also be subject to the following
resides; internal revenue taxes, among others, imposed under
the Tax Code:
b. He must file a Sworn Statement on or before January
31 of every year that his annual taxable income for the a. Value-Added Tax (VAT) or other Percentage Tax, as
previous year does not exceed the poverty level as the case may be – If he is self-employed or engaged in
determined by the National Economic and Development business or practice of profession, and his gross annual
Authority (NEDA) thru the National Statistical sales and/or receipts exceeds P1,919,500 or such
Coordination Board (NSCB); and amount to which this may be adjusted pursuant to Sec.
109(1)(V) of the Tax Code, he shall be subject to VAT.
c. If qualified, his name shall be recorded by the RDO in Otherwise, he shall be subject to the 3% Percentage
the Master List of Tax-Exempt Senior Citizens for that Tax;
particular year, which the RDO is mandatorily required
to keep. b. Donor's Tax – All donations made by a Senior Citizen
during any calendar year, unless exempt under a
However, a Senior Citizen who is a compensation specific provision of law, shall be subject to the Donor’s
income earner deriving from only one employer an Tax Imposed under Title III of the Tax Code;
annual taxable income exceeding the poverty level or
the amount determined by the NEDA thru the NSCB on c. Estate Tax – In the event of death, the estate of the
a particular year, but whose income had been subjected Senior Citizen may also be subject to the Estate Tax
to the Withholding Tax on compensation, shall, although following the rules enunciated under Title III of the Tax
not exempt from IT, be entitled to the substituted filing Code and its implementing Regulations;
of ITR.
d. Excise Tax on certain goods; and
The exemption of Senior Citizens from IT will not
extend to the following taxes: e. Documentary Stamp Tax.
a. The 20% Final Withholding Tax (FWT) on interest All establishments, supplying any of the following goods
income from any currency bank deposit, yield and other and services to Senior Citizen for their exclusive use and
monetary benefit from deposit substitutes, trust fund enjoyment or availment, shall give a discount of 20%:
and similar arrangements; royalties (except on books,
as well as other literary works and musical a. Medicines, including influenza and pneumococcal
compositions, which shall be imposed a FWT of 10%); vaccines, and such other essential medical supplies,
prizes (except prizes amounting to P 10,000 or less accessories and equipment to be determined by the
which shall be subject to IT at the rates prescribed Department of Health (DOH). On all drug stores,
under Sec. 24(A) of the Tax Code), and other winnings hospital pharmacies, medical and optical clinics and
(except Philippine Charity Sweepstakes and Lotto similar establishments dispensing medicines, the
winnings); discount for sales of drugs/medicines shall be subject to
the guidelines to be issued by the Bureau of Food and
Drugs (BFAD), DOH, in coordination with the Philippine services rendered to Senior Citizens. The discounts
Health Insurance Corporation (PhilHealth). granted to Senior Citizens by the seller of qualified
goods and services shallbe treated as an ordinary and
b. On the professional fees of attending physician/s in necessary expenses deductible from the gross income
all private hospitals, medical facilities, outpatient clinics of the seller falling under the category of itemized
and home health care services, where the discount shall deductions, and can only be claimed if the seller does
be based on the compensation for services charged from not opt for the Optional Standard Deduction during the
the Senior Citizen. taxable quarter/year. The claim of the discount granted
under the Act, as an additional item of deduction from
c. On professional fees of licensed professional health the gross income of the seller, is subject to the following
workers providing home health care services as conditions:
endorsed by private hospitals or employed through
home health care employment agencies, where the a. Only that portion of the gross sales exclusively used,
discount shall be based on the fees charged from the consumed or enjoyed by the Senior Citizen shall be
Senior Citizen. eligible for the deductible sales discount.
d. On medical and dental services, diagnostic and b. The gross selling price and the sales discount must
laboratory fees in all private hospitals, medical facilities, be separately indicated in the official receipt or sales
outpatient clinics and home health care services, in invoice issued by the establishment for the sale of goods
accordance with the rules and regulations to be issued or services to the Senior Citizen.
by the DOH, in coordination with the PhilHealth.
c. Only the actual amount of the discount granted or a
e. In actual fare for land transportation travel in Public sales discount not less than the statutory rate (20%,
Utility Buses, Public Utility Jeepneys, taxis, Asian Utility 5% or 50% when applicable), whichever is higher,
Vehicles, shuttle services and public railways, including based on the gross selling price can be deducted from
Light Rail Transit, Mass Rail Transit and Philippine the gross income, net of VAT, if applicable, for Income
National Railways. Tax purposes, and from gross sales or gross receipts of
the business enterprise concerned, for VAT or other
f. On actual transportation fare for domestic air Percentage Tax (PT) purposes.
transport services and sea shipping vessels and the like,
based on the actual fare and advanced booking. d. The seller must record its sales inclusive of the
discount granted.
g. On the utilization of services in hotels and similar
lodging establishments, restaurants and recreation e. The discount can only be allowed as a deduction from
centers. gross income for the same taxable year that the
discount is granted.
h. On admission fees charged by theaters, cinema
houses and concert halls, circuses, carnivals and other f. The business establishment giving sales discounts to
similar places of culture, leisure and amusement, where qualified Senior Citizens is required to keep a separate
the discount shall be on the admission fees charged by and accurate record of sales, which shall include the
the said establishments; name of the Senior Citizen, OSCA ID, gross
sales/receipts, sales discount granted, dates of
i. On funeral and burial services for the death of Senior transactions and invoice numbers for every sale
Citizens. The beneficiary or any person who shall transaction to Senior Citizen.
shoulder the funeral and burial expenses of the
deceased Senior Citizen shall claim the discount, such g. Only business establishments selling any of the
as casket, embalmment, cremation cost and other qualified goods and services to Senior Citizens where an
related services for the Senior Citizen upon payment actual discount was granted may claim the deduction.
and presentation of his death certificate;
h. The seller must not claim the Optional Standard
The monthly utilization of water and electricity by the Deduction during the taxable year. The sellers are
Senior Citizen supplied by public utilities will be subject precluded from billing any VAT to the Senior Citizen to
to a 5% discount upon concurrence of the following: ensure the full entitlement to the discount prescribed in
the Act. If the seller uses a Point of Sale Machine or a
a. The individual meters for the said utilities are Cash Register Machine in lieu of the regular sales
registered in the name of the Senior Citizen residing invoice, the machine tape must properly segregate the
therein; exempt sales from the taxable sales. The input tax
attributable to the exempt sale shallnot be allowed as
b. The monthly consumption does not exceed 100kwh an input tax credit and must be closed to cost or
of electricity and 30 m3 of water; and expense account by the seller.
c. The privilege is granted per household regardless of The exemption herein granted will not cover other
the number of Senior Citizens residing therein. indirect taxes that may be passed on by the seller to a
Senior Citizen buyer, such as Percentage Tax, Excise
For the consumption of water, electricity and telephone, Tax, etc. In such a case, the discount must be on the
there shall be granted by public utilities a discount of at total cost of the goods or services charged by the seller
least 50% on the consumption by a Senior Citizens exclusive of the tax.
Center and residential care/group homes that are run
by the Government or by a non-stock, non-profit A benefactor of a Senior Citizen shall be entitled to
domestic corporation organized and operated primarily claim the basic personal exemption of P 50,000.00,
for the purpose of promoting the well-being of which is the amount of basic personal exemption
abandoned, neglected, unattached, or homeless Senior allowed under RA No. 9504 for all taxpayers required to
Citizens, subject to the guidelines formulated by the file ITRs. A Senior Citizen who is not gainfully employed,
Department of Social Welfare and Development. living with and dependent upon his benefactor for chief
support, although treated as dependent under the Act,
All establishments supplying any of the said goods and will not entitle the benefactor to claim the additional
services may claim the discounts granted as a tax personal exemption of P 25,000.00. The entitlement to
deduction based on the cost of the goods sold or claim the additional personal exemption per dependent
(not exceeding four) is allowable only to individual for the exclusive use and enjoyment or availment of the
taxpayers with a qualified dependent child or children, Senior Citizen:
subject to the conditions set forth under Section 35(B)
of the Tax Code, as amended. If required to file an ITR, i. on the purchase of medicines;
the benefactor shall state therein the name, birthday
and OSCA ID number of the dependent Senior Citizen. ii. on the professional fees of attending physician/s in all
private hospitals, medical facilities, outpatient clinics
Private establishments employing Senior Citizens shall and home health care services;
be entitled to additional deduction from their gross
income equivalent to 15% of the total amount paid as iii. on the professional fees of licensed professional
salaries and wages to Senior Citizens, subject to the health providing home health care services as endorsed
provision of Section 34 of the Tax Code and its by private hospitals or employed through home health
implementing rules and regulations, provided the care employment agencies;
following conditions are met:
iv. on medical and dental services, diagnostic and
a. The employment shall have to continue for a period laboratory fees in all private hospitals, medical facilities,
of at least six (6) months; outpatient clinics, and home health care services;
b. The annual taxable income of the Senior Citizen does v. in actual fare for land transportation travel, domestic
not exceed the poverty level as may be determined by air transport services and sea shipping vessels and the
the NEDA thru the NSCB. For this purpose, the Senior like;
Citizen shall submit to his employer a sworn certification
that his annual taxable income does not exceed the vi. on the utilization of services in hotels and similar
poverty level. lodging establishments, restaurants and recreation
centers;
Any person who violates any provision of the
Regulations shall suffer the penalties provided in the Tax vii. on admission fees charged by theaters, cinema
Code. Furthermore, any person who violates any houses and concert halls, circuses, leisure and
provision of the Implementing Rules and Regulations amusement; and
(IRR) of the Act shall be imposed the following
penalties: viii. on funeral and burial services for the death of Senior
Citizens.
a. For the first violation, a fine of not less than P
50,000.00 but not exceeding P 100,000.00 and b. Exemption from the payment of individual Income
imprisonment of not less than two (2) years but not Taxes of Senior Citizens who are considered to be
more than six (6) years; and minimum wage earners
b. For any subsequent violation, a fine of not less than c. Grant of a minimum of 5% discount relative to the
P 100,000.00 but not exceeding P 200,000.00 and monthly utilization of water and electricity supplied by
imprisonment for not less than two (2) years but not the public utilities
less than six (6) years.
RR 74-99
Any person who abuses the privileges granted herein SECTION 1. Scope. — This Circular is being issued to
shall be punished with a fine of not less than P consolidate and harmonize all the pertinent tax laws and
50,000.00, but not more than P 100,000.00, and their corresponding implementing rules and regulations
imprisonment of not less than six (6) months. If the
in respect of sales of goods, property and services to
offender is an alien or a foreigner, he shall be deported
immediately after service of sentence without further and from the ECOZONES, in relation to the provisions of
deportation proceedings. If the offender is a R.A. No. 7916, as amended by R.A. No. 8748, entitled
corporation, organization or any similar entity, the "The Special Economic Zone Act of 1995" which created
official/s thereof directly involved shall be liable the Philippine Economic Zone Authority (PEZA).
therefore.
SECTION 2. Background. — In general, enterprises
Upon filing an appropriate complaint and after due registered and operating under the said Act, otherwise
notice and hearing, the proper authorities may also known as ECOZONE or PEZA registered enterprises,
cause the cancellation or revocation of the business
shall only be imposed with a 5% special tax, based on
permit, permit to operate, franchise and other similar
privileges granted to any business entity that fails to "gross income earned" in lieu of all taxes, except the
abide by the provisions of the Act and its IRR and the real property tax. However, this tax incentive only
Regulations. applies in respect of the registered enterprise's
operations within the ECOZONE. The ECOZONES "are
RMC-38-2012 selected areas with highly developed or which have the
Please the PDF File
potential to be developed into agro-industrial, industrial
RMC 45-2010 issued on June 2, 2010 circularizes tourist/recreational, commercial, banking, investment
Section 4 and 5 of Republic Act (RA) No. 9994 relative and financial centers. An ECOZONE may contain any or
to the grant of additional benefits and privileges to all of the following: industrial estates, export processing
Senior Citizens, further amending Republic Act No. zones, free trade zones, and tourist/recreational
7432, as amended, otherwise known as “An Act to centers." (SEC. 4 (a), R.A. No. 7916).
Maximize the Contribution of Senior Citizens to Nation
Building, Grant Benefits and Special Privileges and for The ECOZONE "shall be managed and operated by the
Other Purposes”.
PEZA as a separate customs territory." (SEC. 8,id.) The
term "Customs Territory" means "the national
Among the privileges granted to Senior Citizens are:
territory of the Philippines outside of the proclaimed
a. Grant of 20% discount and exemption from the boundaries of the ECOZONES except those areas
Value-Added Tax (VAT), if applicable, on the sale of the specifically declared by other laws and/or presidential
following goods and services from all establishments, proclamations to have the status of special economic
zones and/or free ports." (Sec. 1 (g),PEZA Rules and sale of goods, property or services made by a VAT
Regulations). Generally, products manufactured or registered supplier from the Customs Territory to any
produced within the ECOZONE are destined for export registered enterprise operating in the ecozone,
to foreign countries. While such products, under certain regardless of the class or type of the latter's PEZA
conditions, may also be sold to buyers in the Customs registration, is actually qualified and thus legally entitled
Territory, i.e., outside the ECOZONE, such sales are to the zero percent (0%) VAT. Accordingly, all sales of
technically considered as importation by such buyer goods or property to such enterprise made by a VAT
from the Customs Territory. Since the ECOZONE is registered supplier from the Customs Territory shall be
technically treated as another separate Customs treated subject to 0% VAT, pursuant to Sec.
Territory, the buyer is treated as an importer and is 106(A)(2)(a)(5), NIRC, in relation to ART. 77(2) of the
imposed with the corresponding import taxes and Omnibus Investments Code, while all sales of services
customs duties on his purchase of products from within to the said enterprises, made by VAT registered
the ECOZONE. While all ECOZONE enterprises are not suppliers from the Customs Territory, shall be treated
necessarily manufacturer-exporters of products effectively subject to the 0% VAT, pursuant to Section
considering that there are also service enterprises 108(B)(3), NIRC, in relation to the provisions of R.A.
registered as ECOZONE enterprises, however, taken as 7916 and the "Cross Border Doctrine" of the VAT
a whole, all their integrated activities eventually system. Cdpr This Circular shall serve as a sufficient
translate into manufactured products which are either basis to entitle such supplier of goods, property or
actually exported to foreign countries, in which case, no services to the benefit of the zero percent (0%) VAT for
VAT must form part of its export price; or actually sold sales made to the aforementioned ECOZONE enterprises
to buyers from the Customs Territory, in which case, and shall serve as sufficient compliance to the CD
10% VAT shall be paid thereon by such buyers, Technologies Asia, Inc. © 2016 cdasiaonline.com
consistent with the "Cross Border Doctrine" of the VAT requirement for prior approval of zero-rating imposed
system. The Philippines' Value Added Tax (VAT) law by Revenue Regulations No. 7-95 effective as of the
adheres to the "Cross Border Doctrine" of the VAT date of the issuance of this Circular.
System, which basically means that no VAT shall be
imposed to form part of the cost of goods destined for SECTION 4. Tax Treatment Of Sales Made By A
consumption outside of the territorial border of the VAT-Exempt Supplier From The Customs Territory,
taxing authority. Hence, actual export of goods and To A PEZA Registered Enterprise. — Sale of goods,
services from the Philippines to a foreign country must property and services by VAT-Exempt Supplier from the
be free of the VAT. Conversely, those destined for use Customs Territory, to a PEZA-registered enterprise shall
or consumption within the Philippines shall be imposed be treated exempt from VAT, pursuant to Sec. 109, in
with the 12% VAT. Accordingly, interpretation of the relation to Sec. 236, NIRC, regardless of whether or not
provisions of the VAT law has been harmonized with the the PEZA registered buyer is subject to taxes under the
"Cross Border Doctrine". NIRC, or enjoying the 5% special tax regime, or a
registered manufacturer-exporter the "Cross Border
SECTION 3. Tax Treatment Of Sales Made By A VAT Doctrine" of the VAT System to the contrary
Registered Supplier From The Customs Territory, notwithstanding.
To A PEZA Registered Enterprise. —
SECTION 5. Tax Treatment Of Sales Made By A
(1) If the Buyer is a PEZA registered enterprise which PEZA Registered Enterprise. —
is subject to the 5% special tax regime, in lieu of all
taxes, except real property tax, pursuant to R.A. No. (1) Sale of goods (i.e., merchandise), by a PEZA-
7916, as amended: registered enterprise, to a buyer from the Customs
Territory (i.e., domestic sales). — This case shall be
(a) Sale of goods (i.e., merchandise). — This shall be treated as a technical importation made by the Buyer.
treated as indirect export hence, considered subject to Such Buyer shall be treated as an importer thereof and
zero percent (0%) VAT, pursuant to Sec. shall be imposed with the corresponding import tax/es
106(A)(2)(a)(5), NIRC and Sec. 23 of R.A. No. 7916, in (i.e., VAT or VAT plus excise tax, as the case may be),
relation to ART. 77(2) of the Omnibus Investments pursuant to Sec. 107, Title IV and Title VI, NIRC, in
Code. (b) Sale of service. — This shall be treated subject relation to Sec. 26, R.A. No. 7916, as implemented by
to zero percent (0%) VAT under the "cross border Sec. 2, Rule VIII, PART V of the PEZA rules and
doctrine" of the VAT System, pursuant to VAT Ruling No. regulations entitled "Rules and Regulations to
032-98 dated Nov. 5, 1998. (2) If Buyer is a PEZA Implement Republic Act No. 7916." The registered
registered enterprise which is not embraced by the 5% enterprise's "gross income earned" therefrom shall be
special tax regime, hence, subject to taxes under the subject to the 5% special tax pursuant to Sec. 24 of R.A.
NIRC, e.g., Service Establishments which are subject to No. 7916: Provided, however, that its sales in the
taxes under the NIRC rather than the 5% special tax Customs Territory do not exceed the threshold allowed
regime: (a) Sale of goods (i.e., merchandise). — This or permitted for such sales, pursuant to the pertinent
shall be treated as indirect export hence, considered provisions of the PEZA rules and regulations: Provided,
subject to zero percent (0%) VAT, pursuant to Sec. further, that for income tax purposes, if such sales
106(A)(2)(a)(5), NIRC and Sec. 23 of R.A. No. 7916 in should exceed the aforesaid threshold, its income
relation to ART. 77(2) of the Omnibus Investments derived from such excess sales shall be imposed with
Code. the normal income tax pursuant to the provisions of Title
II, NIRC: Provided, further, that in computing for the
(b) Sale of Service. — This shall be treated subject to income tax due on such excess sales, its net income
zero percent (0%) VAT under the "cross border from such excess sales shall be determined in
doctrine" of the VAT System, pursuant to VAT Ruling No. accordance with the method of general apportionment
032-98 dated Nov. 5, 1998. 3. In the final analysis, any pursuant to the provisions of Sec. 50, NIRC, (i.e.,
compute its total net income from total sales, then, instant noodles; coffee; coffee creamer; sugar; cooking
compute its net income from such excess sales by oil; salt; laundry soap and detergents; firewood;
general apportionment, as follows: Excess sales divided charcoal; household liquefied petroleum gas (LPG) and
kerosene; candles; drugs classified as essential by the
by total sales times total net income from total sales
Department of Health and such other goods as may be
equals net income from excess sales). classified by the Department of Trade and Industry and
Department of Agriculture.
(2) Sale of Services by a PEZA Registered Enterprise to 5.3 Dental Services – refers to oral examination,
a Buyer from the Customs Territory. — This type of cleaning, permanent and temporary filling, extractions
transaction is not embraced by the 5% special tax and gum treatments, restoration, replacement or
regime governing PEZA-registered enterprises pursuant repositioning of teeth, or alteration of the alveolar or
to R.A. No. 7916, as implemented by the PEZA rules and periodontium process of the maxilla and the mandible
regulations hence, such seller shall be subject to the that are necessary for the diagnosis and/or treatment of
a dental illness or injury.
12% VAT, pursuant to Section 108 or to the percentage
5.4 Diagnostic and Laboratory Tests – any
tax, pursuant to Title V, whichever is applicable, and to procedure conducted for diagnostic purposes. It shall
the normal income tax on income derived therefrom, include such procedures as x-rays, CT-scans, MRI scans,
pursuant to Title II, NIRC. Such income tax shall be PET scans, blood chemistry exams, histopathology and
computed in accordance with the method of general immunopathology, hematology, urine analysis,
apportionment provided in the immediately preceding parasitology and bacteriology tests, serology, blood
banking and all other diagnostic radiology, clinical
paragraph.
laboratory and other diagnostic examinations that are
necessary for the diagnosis of the disability or medical
(3) Sale of Goods, by a PEZA Registered Enterprise, to
condition of a person with disability. It shall also
Another PEZA (i.e., Intra ECOZONE Sales of Goods). — include clinical psychological tests, assessment of
Its sale of goods or property to another zone enterprise speech conditions, test for hearing acuity, visual acuity,
shall be exempt from VAT, pursuant to Sec. 109(q), learning impairment, and related psychosocial
NIRC, in relation to Sec. 24, R.A. 7916, as implemented conditions like drug testing.
by Sec. 1, Rule VIII, PART V, of the PEZA implementing 5.5 Drug / Medicine – refers to any chemical
compound or biological substance, other than food,
rules and regulations.
intended for use in the treatment, prevention or
diagnosis of disease in humans or animals, including but
(4) Sale of Service by ECOZONE Enterprise, to Another
not limited to:
ECOZONE Enterprise (Intra ECOZONE Enterprise Sale of 5.5.1 Any article recognized in the official United States
Service): Pharmacopoeia – National Formulary (USP-NF), official
Homeopathic Pharmacopoeia of the United States,
(a) If PEZA-Registered Seller is Subject to the 5% Philippine Pharmacopoeia, Philippine National Drug
Special Tax Regime. — Exempt from VAT or any Formulary, British Pharmacopoeia, European
percentage tax, pursuant to Sec. 24, R.A. 7916. (b) If Pharmacopoeia, Japanese Pharmacopoeia, Indian
PEZA-Registered Seller is Subject to Taxes Under the Pharmacopoeia, any national compendium or any
supplement to any of them
NIRC . — Subject to zero percent (0%) VAT pursuant to
5.5.2 Any article intended for use in the diagnosis, cure,
the "Cross Border Doctrine" of the VAT system, mitigation, treatment or prevention of disease in
regardless of the type or class of PEZA registration of humans or animals
the PEZA enterprise. Buyer, since the use for or benefit 5.5.3 Any article other than food intended to affect the
from such purchase of service shall eventually be structure or any function of the human body or animals
translated to actual export of goods (i.e., shipment of 5.5.4 Any article intended for use as a component of any
goods to a foreign country, which is subject to zero articles specified in items 5.5.1 to 5.5.3 not including
devices or their components, parts or accessories
percent (0%) VAT, or translated into technical export of
5.5.5 Herbal and/or traditional drugs which are articles
goods (i.e., sale of goods to a buyer from the Customs of plant or animal origin used in folk medicine which are:
Territory, which is treated as importation by such buyer,
hence, subject to 12% VAT against the said buyer). Recognized in the Philippine National Drug Formulary
Intended for use in the treatment or cure or
SECTION 6. Repealing Clause. — Any BIR Ruling, if mitigation of disease symptoms, injury or body
inconsistent herewith, is hereby considered amended, effects in humans
modified or revoked accordingly. Other than food, intended to affect the structure or
any function of the human body
IRR of RA 10754 In finished or ready-to-use dosage form
Intended for use as a component of any of the
articles specified in bullets 1 to 4.
Section 5. Definition of Terms – For purposes of
These may also include vitamins and minerals provided
these Rules and Regulations, these terms are defined as
that these are in accordance with the Food and Drug
follows:
Administration’s prevailing cut-off on vitamins and
5.1 Persons with Disability – are those who have
minerals classified as drug / medicine i.e product
long-term physical, mental, intellectual or sensory
containing more than 150% of water-soluble vitamins
impairments which in interaction with various barriers
and more than 102% of fat soluble vitamins. For herbs
may hinder their full and effective participation in
to be classified under this definition, levels and amounts
society on an equal basis with others. For purposes of
as well as registration status is required when indicated
these Rules and Regulations, persons with disability
for therapeutic use.
shall be classified by the Department of Health (DOH)
5.6 Essential Drug / Medicine – refers to drugs /
through an issuance.
medicines that satisfy the priority health care needs of
5.2 Basic Necessities – are goods vital to the needs
the population and which are selected based on the
of consumers for their sustenance and existence such
evidence of their efficacy, safety and comparative cost
as, but not limited to, rice; corn; root crops; bread;
effectiveness.
fresh, dried or canned fish and other marine products;
5.7 Essential Drug List or National Drug
fresh pork, beef and poultry meat; fresh eggs, potable
Formulary – Refers to a list of drugs prepared and
water in bottles and containers; fresh and processed
periodically updated by the Department of Health on the
milk; fresh vegetables and fruits; locally manufactured
basis of health conditions obtaining in the Philippines as Department of Health and other commodities that may
well as on internationally accepted criteria. be classified by the Department of Trade and Industry
5.8 Foods for Special Medical Purposes – refers to and the Department of Agriculture.
category of foods for special dietary uses which are 5.12 Recreation Centers – refers to any
specially processed or formulated and presented for the establishment offering recreation services with facilities
dietary management of patients and may be used only that include but not limited to internet cafes, video
under medical supervision. They are intended for the games, other similar amusement facilities, theaters,
exclusive or partial feeding of patients with limited or cinema houses, concert halls, circuses, carnivals and
impaired capacity to take, digest, absorb or metabolize other places of culture and leisure. This definition
ordinary foodstuffs or certain nutrients contained excludes establishments with gambling facilities.
therein, or who have other special medically-determined 5.13 Restaurant – refers to any establishment duly
nutrient requirements, whose dietary management licensed by the government selling to the public, regular
cannot be achieved only by modification of the normal and special meals or menu. This may include but not
diet, by other foods for special dietary uses, or by a limited to food, drinks, beverages, desserts and other
combination of the two. consumable items served by the establishment
5.9 Lodging Establishment – refers to public and including value meals and other similar food counters,
private establishments that charge daily, weekly, fast food, cooked food and short orders including take-
monthly rates or fees which include but not limited to outs.
the following: Section 6. Twenty Percent (20%) Discount and
5.9.1 Apartel refers to building or edifice containing Value Added Tax (VAT) Exemption – Persons with
several independent and furnished or semi-furnished disability shall be entitled to the grant of 20% discount
apartments, regularly leased to tourists and travelers and VAT-exemption on the purchase of certain goods
for dwelling on a more or less long-term basis and and services from all establishments for their exclusive
offering basic services to its tenants, similar to hotels. use, enjoyment or availment; Provided, however, that
5.9.2 Dormitory refers to any permanent structure the purchase of such goods and services from sellers
with private rooms where persons, students in that are not subject to Value Added Tax (VAT) shall be
particular, may be regularly accepted as boarders and subject to the applicable percentage tax.
provided with lodging and/or meals. For this purpose, subsequent purchases by persons with
5.9.3 Motorist Hotel refers to any structure with disability on the same day from the same
several separate units, primarily located along the establishments shall still be subjected to 20% discount
highway, with individual or common parking space, at and VAT-exemption.
which motorists may obtain lodging and in some All establishments shall place signages in conspicuous
instances, meals. areas within their premises to inform persons with
5.9.4 Pension House refers to a private or family- disabilities that they are entitled to the 20% discount
operated tourist boarding house, tourist guest house or and VAT-exemption.
tourist lodging house, regularly catering to tourist, The Department of Finance thru the Bureau of Internal
and/or traveler, containing several independent table Revenue shall issue the corresponding Revenue
rooms, providing common facilities such as toilets, Regulations and/or Revenue Memorandum Circulars
bathrooms/showers, living and dining rooms and/or related to the grant of the 20% discount and VAT-
kitchen and where a combination of board and lodging exemption for persons with disability.
may be provided. The Department of the Interior and Local Government
5.9.5 Tourist Inn refers to lodging establishment shall also ensure that all local government units are
catering to transients, which does not meet the informed about the law for the smooth implementation
minimum requirement of an economy hotel. of the 20% discount and VAT-exemption for persons
The term lodging establishment shall include lodging with disability in their areas of jurisdiction.
houses, which shall mean such establishments are Section 6.1 Lodging Establishments – This shall
regularly engaged in the hotel business, but which, apply to room accommodation and other amenities
nevertheless, are not registered, classified and licensed offered by the establishment such as but not limited to
as hotels by reason of inadequate essential facilities and massage parlor, sauna bath, food, drinks and other
services. It also includes resort, which shall refer to any services offered. The said discount and exemption will
place or places with pleasant environment and only apply to persons with disability.
atmosphere conducive to comfort, healthful relaxation The Department of Tourism shall issue the
and rest, offering food, sleeping accommodation and corresponding guidelines, circulars or directives related
recreational facilities to the public for a fee or to this section for its accredited lodging establishments
remuneration. and disseminate such information to all concerned.
The term, however, excludes homestay or an alternative The concerned academic institutions shall also ensure
tourism where tourists will stay with the host’s family in that dormitories under their jurisdiction grant the 20%
the same house and will experience the everyday life of discount and VAT-exemption to students with
the family and the local community. disabilities.
5.10 Medical Services – refers to health services Section 6.2 Restaurants – This shall apply to the
which include but not limited to prevention of disability purchase of food, drinks, beverages, dessert and other
through immunization, nutrition, environmental consumable items served by the establishments
protection and preservation; genetic counseling; early including value meals and other similar food counters,
detection of disability and timely intervention to arrest fast food, cooked food and short orders including take
disabling condition and medical treatment and outs. To safeguard the establishments from abuse of
rehabilitation including mobility assistive devices. this privilege, the orders should be limited only to the
5.11 Prime Commodities – are goods not considered consumption of the concerned person with disability.
as basic necessities but are essential to consumers such Section 6.3 Recreation Centers – This shall apply to
as, but not limited to flour; dried, processed or canned admission fees of persons with disability charged by
pork, beef and poultry meat; dairy products not falling theaters, cinema houses, concert halls, circuses,
under basic necessities; onions; garlic; vinegar; patis; carnivals and other places of culture and leisure. The
soy sauce; toilet soap; fertilizer; pesticides and said discount and exemption shall also apply to charges
herbicides; poultry, livestock and fishery feeds and in the utilization of services including rentals of facilities
veterinary products; paper; school supplies; nipa and equipment and other accessories and gadgets to be
shingles; sawali; cement; clinker; GI sheets, hollow used, enjoyed or availed by persons with disability in
blocks; plywood; plyboard; construction nails; these centers.
batteries; electrical supplies; lightbulbs; steel wire; all The Department of Tourism shall issue the
drugs not classified as essential drugs by the corresponding guidelines, circulars or directives related
to Sections 6.2 and 6.3 for its accredited restaurants ensure that mortuaries under their jurisdiction are
and recreation centers and disseminate such compliant to the law by including the grant of 20%
information to all concerned. discount and VAT-exemption to persons with disability
The Local Government Units concerned, in coordination as part of the terms and conditions in the issuance of
with the Leagues of Cities and Municipalities, shall also business permits to the aforementioned establishments.
ensure that restaurants and recreation centers under
their jurisdiction are compliant to the law by including
the grant of 20% discount and VAT-exemption to
persons with disability as part of the terms and
conditions in the issuance of business permits to the
aforementioned establishments.
Section 6.4 Purchase of Medicines and Foods for
Special Medical Purposes – This shall apply to the
purchase of prescribed generic and branded drugs /
medicines as well as foods for special medical purposes
in all drugstores for the exclusive use or availment of
persons with disability.
The Department of Health, in coordination with the
Philippine Health Insurance Corporation and Food and
Drug Administration, shall issue the corresponding
guidelines, circulars or directives related to this section
and disseminate such information to all concerned.
Section 6.5 Medical and Dental Services,
Diagnostic and Laboratory Fees and Professional
Fees of Attending Doctors – This shall apply to the
availment of medical and dental services including
diagnostic and laboratory fees by persons with disability
in government facilities or private hospitals and medical
facilities. The said discount and exemption shall also
apply to the professional fees of attending doctors in
such facilities.
The Department of Health, in coordination with the
Philippine Health Insurance Corporation, shall issue the
corresponding guidelines, circulars or directives related
to this section and disseminate such information to all
concerned.
Section 6.6 Domestic Air and Sea Travel – This shall
cover the actual fare for domestic air and sea travel. For
promotional fares, the Section on No Double Discounts
should apply.
Section 6.7 Land Transportation Travel – This shall
apply to actual fare for land transportation travel such
as, but not limited to, public utility buses or jeepneys,
taxis, Asian Utility Vehicles (AUVs), shuttle services,
public railways including Light Rail Transit, Metro Rail
Transit and Philippine National Railways and
Transportation Network Vehicle Services (TNVS) such as
Grab, Uber and the like.
The Department of Transportation including those
agencies attached and under its administrative
supervision and control shall issue the corresponding
guidelines, circulars or directives related to domestic air,
sea and land transportation travel and disseminate such
information to all concerned.
The Local Government Units concerned, in coordination
with the Leagues of Cities and Municipalities, shall also
ensure the passage of local ordinance to enjoin
transport groups to grant this benefit/privilege.
Further, land transport groups shall place signages
within public utility vehicles, shuttle services and public
railways to inform persons with disability that they are
entitled to the benefit/privilege.
Section 6.8 Funeral and Burial Services for the
Death of a Person with Disability – The beneficiary
or any person who shall shoulder the funeral and burial
expenses of the deceased person with disability, shall
claim the discount under this rule for the deceased
person with disability upon presentation of the death
certificate and person with disability identification card
(ID) or in its absence, the original or certified true copy
of the proof of registration from the issuing local
government unit. Such expenses shall cover the
purchase of casket, urn, embalming, hospital morgue,
transport of the body to intended burial site in the place
of origin, but shall exclude obituary publication and the
cost of the memorial lot.
The Local Government Units concerned, in coordination
with the Leagues of Cities and Municipalities, shall
PERCENTAGE TAX k) Sale, barter or exchange of shares of
stock listed and traded through the local
Percentage tax is a business tax imposed on persons or stock exchange or through initial public
entities/transactions: offering
b) International air/shipping carriers doing Electric , gas and water Gross Receipts 2%
business in the Philippines on their utilities
gross receipts derived from transport of
cargo from the Philippines to another Radio and television Gross Receipts 3%
country broadcasting companies
whose annual gross receipts
c) Franchise grantees of – of the preceding year do not
exceed P 10,000,000 and did
i) radio and/or television not opt to register asVAT
broadcasting whose gross taxpayer
annual receipts for the
preceding year do not exceed Banks and non-bank Interest,
Php 10,000,000.00 and did not financing intermediaries commissions and
opt to register as VAT taxpayers discounts from
lending activities as
ii) gas and water utilities well as income from
leasing on the basis
d) Overseas dispatch, message or of remaining
conversation transmitted from the maturities of
Philippines, except those transmitted by instruments:
the Philippine government, any
embassy and consular offices of a • Short term 5%
foreign government, public maturity (not over 2
international organizations enjoying years)
exemptions pursuant to an international
agreement and news messages to a • Medium term 3%
maturity (over 2
bona fide correspondent furnishing
years but not over 4
general news service
years)
e) Banks and non-bank financial
intermediaries performing quasi- • Long term
banking functions maturity
• Over 33 1/3 % 1%
• Short term 5%
maturity (not over 2
years)
• Medium term 3%
(over 2 years but not
CASES
over 4 years)
PHILIPPINE BASKETBALL ASSOCIATION
• Long Term vs.
Maturity COURT OF APPEALS, COURT OF TAX APPEALS, AND
COMMISSIONER OF INTERNAL REVENUE
ο Over 4 years but 1%
not over 7 years G.R. No. 119122 August 8, 2000
Facts:
ο Over 7 years 0%