TAXATION FINALS

• There are three major business taxes in the Philippines: Value-Added Tax (VAT), Percentage Tax, and Excise Tax on certain goods
• Business taxes


  Taxes imposed on the sale, barter or exchange, importation, sale of services, value in money, or receipts derived by the manufacturer, producer, importer, or seller, based on a given ratio between the gross sales and receipts and the burden imposed on the taxpayer
• Basic Rules in Business Tax

  • Employment or occupation which occupies one's time, attention, and labor for the purpose of a livelihood or profit
  • Progression, continuity, or sustained activity where the realization of profit is the end motive
  • Even a single business transaction for the whole year is considered "doing business" if when repeated would be a series of business activities where profit is the end motive
• Business taxes are applicable not only to the selling of goods but to the sale of services and/or lease of properties
• Non-resident foreign person


  Subject to 12% VAT for services rendered in the Philippines even if the performance of such service is not regular
• A person may be subject to business taxes like the 12% VAT for the importation of goods for non-business use and to percentage tax on overseas communication tax and excise taxes on the importation of excisable goods even if he is not engaged in business
• Sale of scraps (empty drums, plastic bottles/containers, plastic bags, sacks, cartons, wood crates and other used articles in the business including obsolete equipment, and fully depreciated properties are still subject to business taxes
• Sale of goods to one's own employees, whether in cash or on installment or even at a discounted price is subject to business tax
• Value-Added Tax (VAT)


  A form of sales tax, a tax on consumption levied on the sale, barter, exchange or lease of goods or properties and services in the Philippines and on importation of goods into the Philippines, an indirect tax that may be shifted or passed on to the buyer, transferee, or lessee of goods, properties, or services
• The increase from VAT to 12% VAT started (RA 9337)

  February 1, 2006
• The threshold of gross sales and gross receipts of Php 1,500,000 to be VATable has been increased to Php 1,919,500.00 under RR No. 16-2011 which took effect January 1, 2012
• Under the TRAIN Law, the VAT threshold has been increased to more than Php 3.0 million per annum
• Who are Required to File VAT Returns?


  • Any person or entity who, in the course of his trade or business, sells, barters, exchanges, leases goods or properties and renders services subject to VAT, if the aggregate amount of actual gross sales or receipts exceed Three Million Pesos (Php3,000,000.00)
  • A person required to register as VAT taxpayer but failed to register
  • Any person, whether or not made in the course of his trade or business, who imports goods
• The amount of the VAT shall be shown as a separate item in the invoice or receipt
• The VAT threshold is increased to above Php 3.0million under the TRAIN Law
• The optional or voluntary registration as VAT has been removed under the TRAIN Law
• Businessmen and businesses with annual gross sales/receipt of Php 3.0 million and below who opted to be taxed under the TRAIN Act's regular income tax and schedule are exempt from VAT but subject to percentage tax if gross sales/receipts are more than Php 500,000
• VAT taxpayers who become Non-VAT under the TRAIN Law because of the increase in VAT's threshold to Php 3.0 million must reclassify their BIR registration by accomplishing BIR Form No. 1905 - "Application for Registration Information Update" and subsequently pay the corresponding percentage (%) tax instead of the VAT under the Tax Code
• A VAT taxpayer who did not exceed the VAT threshold within the immediately preceding three (3) year period may opt to be a non-VAT taxpayer and avail of the 8% Income Tax rate option
• Electric cooperatives are subject to 12% VAT under TRAIN
• Exempt from 12% VAT under TRAIN

  • Senior citizens
  • Persons with disability (PWD)
  • Cooperatives registered with the CDA
  • Food and agricultural products in their original state
  • Health services
  • Education
  • Renewable energy
  • Tourism enterprises
  • BPO operating within the Special Economic Zone
  • Lease of real properties for residential purposes Php 15,000 and below per month
  • Association dues, membership dues, and other charges collected by homeowners' Association and Condominium Corporations
  • Medicines for diabetes, high cholesterol, and hypertension - exempt from 12% VAT beginning 2019
  • Vacant lots valued at Php 1.5 million and below and houses and lots valued at Php 2.5 million and below (low-cost housing purposes) exemption from 12% VAT is retained from 2018 - 2020 only
  • Socialized housing, mass housing projects in and out of NCR (Php 2.0 million and below) exemption from 12% VAT continues from 2012. By 2021 only real properties sold by real estate dealers (RED group) valued at Php 2.0 million and below shall be exempt from VAT
• Failure or refusal to issue sales receipts or invoices - a fine of not less than Php 500,000 - Php 10.0 million shall be imposed in addition to other penalties
• Transfers as provided under Sec. 40(C)(2) are VAT exempt
• Amortization of input VAT for capital goods is to be repealed by 2022
• GOCCS, SUC, national government agencies Shift to subsidy through the tax expenditure fund (TEF) in the national
• Vacant lots valued at Php 1.5 million and below and houses and lots valued at Php 2.5 million and below (low-cost housing purposes) exemption from 12% VAT is retained from 2018 - 2020 only
• Wala na, balik na sa 12%
• Socialized housing, mass housing projects in and out of NCR (Php 2.0 million and below) exemption from 12% VAT continues from 2012. By 2021 only real properties sold by real estate dealers (RED group) valued at Php 2.0 million and below shall be exempt from VAT
• Dapat mag-issue ng resibo
• Transfers as provided under Sec. 40(C)(2) – VAT exempt
• Transfer of Property
• Amortization of input VAT for capital goods - to be repealed by 2022
• GOCCS, SUC, national government agencies Shift to subsidy through the tax expenditure fund (TEF) in the national budget
• The CIR, tax official, agent, or employee of the BIR is required to act on an application for refund of unutilized input taxes under the Zero-rate sales within 90 days otherwise the subject person will be criminally liable
• Mga 0 rates, exported product, within 90 days lang pagka-file or else puwedeng kasuhan criminally ang mga incharge pagkatapos nilang matanggap ang request and lumagpas sa 90 days and hindi natanggang ang refund
• Goods or Properties


  All tangible and intangible objects that are capable of pecuniary estimation
• Included in "Goods or Properties"

  • Real properties primarily for sale to customers or held for lease in the ordinary course of trade or business
  • The right or the privilege to use patent, copyright, design or model, plan, secret formulas or process, goodwill, trademark, trade brand, or other like property or right
  • The right or the privilege to use in the Philippines of any industrial, commercial, or scientific equipment
  • The right or privilege to use motion picture films, films, tapes, and discs
  • Radio, televisions, satellite transmission, and cable television time
• Under the TRAIN Act, VAT shall be payable on a quarterly basis
• All persons liable to the VAT shall pay the tax for each of the first and second months of a quarter based on the transactions of the month, as reflected in the Monthly VAT Declaration, within 20 days after the end of the month. Within 25 days after the end of the quarter, there shall be a Quarterly VAT return, reflecting the cumulative transactions of the quarter. The VAT paid in the first and second quarters shall be deducted from the output taxes in the quarterly return
• If the input taxes exceed the output taxes during first quarter, there shall be no VAT payable