VATaxable Transactions

2. Sale of services or similar transactions in the course of trade or business.

Sale or Exchange of service
Definition (Section 108)
Some examples of Sale of service:
Dining in restaurant It is a sale of service. Even if the food that youre eating
is a marine product in its original state which is usually exempt thereof but since
you are dining in a restaurant then you are not purchasing the food but you are
purchasing the service which is considered as vat taxable.
Lease of Motion Picture films, films, tapes and discs it is subject to vat but
only the act of leasing is considered vatable because the act of showing it is already
subject to amusement tax. (Take note: amusement tax is already classified as 0PT
and when already subject to OPT then it is no longer subject to VAT).
GR: The sale of service must be in the course of trade or business (Rule on
Regularity)
Exception: Services rendered by Non-resident person. Even if it is not in the ordinary
course of trade or business but so long as the services are rendered here in the
Philippines then it is always treated as in the course of trade or business therefore it
is subject to tax. Even if it is an isolated or just a one day event here in the
Philippines it may be subject to VAT. (concert by foreign artists)
Services of Domestic carrier by air, sea and land. In air and sea kay automatic
vatable. However, domestic carrier in land, if it carries or transport a person or
passengers then it is not subject to vat because as always it will be subject to a 3%
common carriers tax. On the other hand, if the common carrier on land carries
cargo then it may be subjected to 12% vat.
Sale of electricity subject to vat; Sale of non-life insurance (if life insurance
then it is not subject to vat because life is not capable of pecuniary estimation)
CIR v. Sony Philippines (refer to the slide)
The SC ruled that the dole-out or subsidy from the Singaporean company to
the Phil Company neither constituted a sale of goods or properties nor sale of
services.
3. Importation of goods or properties
It is not necessary that it is made in the ordinary course of trade or business
following the Destination principle or the Cross boarder doctrine that if its imported,
it means that the goods or properties are consumed or are located here in the
Philippines and therefore it is subject to vat.
It is vatable whether or not made in the ordinary course of trade or business.
Two cases of tax free Importations:

1. Importation of tax free product regardless of the status of the importer;

subsequent sale is still VAT exempt.
2. Importation of taxable products but exempted due to status of VAT exempt
importer. Subsequent sale to a VATable buyer is subject to VAT! Whether or
not made in the course of trade or business. (Example: PEZA Registered
Enterprise)

Who are VAT taxable?

Those whose gross annual sales or receipts during any year or in any 12-month
period exceed P1,919,500 or even if sales/receipts during any year do not exceed
but REGISTERED under the VAT system.
Note: The threshold before was 1,500,000 so if the year is 2011 or down then use
the 1,500,000.
Advantages of voluntary registration

Primarily: You can avail of the tax credit where you can deduct input vat from
your output vat.

What if you were non-vat registered and your sales for the year exceeded
1,919,500.
You are mandatorily covered under the vat law and because you did not
register then the BIR do not expect you to charge 12% to your customers but only
the least of 3% sales tax which is an OPT. The consequence thereof if the BIR will
find out then it will collect from you the 12% output VAT even if you did not charge it
from your customers other than the 12% output vat, the BIR will have to collect the
3%OPT. Not to mention the surcharges, penalties and the consequence na pwd
ipa.close imu business.
When you register under VAT law then you should follow the requirements thereof
(issue a vat official receipt- with proper heading, specify the tax collected etc.)
Formula:
Output Tax
Less: Input Tax
VAT Payable/(Excess Input Tax)
VAT Carry over/Forward when Input is greater than Output
Sir! Pwede ba mag.refund? Under rare circumstances. Usually the VAT refund will
happen when the business will be closing. Because in so far as the BIR is concern,
they are in collecting of taxes and not of giving refunds.
Non-Vat transaction:

1. Transaction is subject to Other Percentage Tax; VAT will no longer be imposed.

Tax is imposed on Gross Receipts or Gross Income. (Remember: VAT is
imposed in addition to Excise Tax)
2. Some transactions are not subject to any kind of business tax VAT or OPT
(e.g., sale of agri food products in its original state; sale of books; etc)

VAT Zero Rated transactions:

A. Goods or Properties (Section 106)
Three types of VAT Zero Rated goods or properties

Export Sale
Foreign Currency Denominated
Sale to persons or entities whose exemption under special laws or
international agreements to which the Philippines is a signatory effectively
subjects such sales to 0% rate.

Types of VAT Zero rated tax

Automatic VAT zero rated Transaction - by its very nature following the
Destination Principle or Cross Border Doctrine subject to 0% vat or no 12%
VAT.
Effectively VAT zero rated transaction - it doesnt qualify as exempt from tax
or subject to 0% vat under the destination principle but because it is provided
under the law or special law then it is effectively (as if) subject to 0% VAT.

EXPORT Sales (Section 106)

1. Direct Export Vat Registered
pertains to actual shipment (Note: Not raw/packaging materials only! Any
goods) abroad;
paid in acceptable foreign currency or its equivalent;
accounted in accordance with the rules and regulations of BSP (need not go
through BSP);
Do not take into consideration the shipping arrangement i.e. FOB shipping
point/destination.
2. Indirect Export
Sale of raw/packaging material to non-resident buyer;
Shipment is in the Philippines only to the resident export-oriented (REO)
enterprise;
This REO enterprise converts/use it in manufacturing, packing or repacking;
Same requisite as in (1) foreign currency payment in accord to BSP rules

Export Oriented Enterprise pertains to enterprises primarily engaged in the

manufacture or assembly of goods which will eventually be exported outside of the
country. It is a requirement that it must exceed 70% of its total production.
3. Constructive Export The raw/packaging material will eventually be used in
manufacture of the finish product and the finish product will of course be
transported outside of the country.