TAXATION II
ACOSTA-CAJUSTIN
VALUE ADDED TAX
TITLE IV
VALUE-ADDED TAX
CHAPTER I
IMPOSITION OF TAX
SEC. 105. Persons Liable. - Any person who, in the course of trade or business, sells
barters, exchanges, leases goods or properties, renders services, and any person who
imports goods shall be subject to the value-added tax (VAT) imposed in Sections 106
to 108 of this Code.
The value-added tax is an indirect tax and the amount of tax may be shifted or passed
on to the buyer, transferee or lessee of the goods, properties or services.
This rule shall likewise apply to existing contracts of sale or lease of goods, properties
or services at the time of the effectivity of Republic Act No. 7716. cralaw
The phrase "in the course of trade or business" means the regular conduct or pursuit
of a commercial or an economic activity, including transactions incidental thereto, by
any person regardless of whether or not the person engaged therein is a nonstock,
nonprofit private organization (irrespective of the disposition of its net income and
whether or not it sells exclusively to members or their guests), or government
entity. cralaw
The rule of regularity, to the contrary notwithstanding, services as defined in this
Code rendered in the Philippines by nonresident foreign persons shall be considered
as being course of trade or business. cralaw
SEC. 106. Value-Added Tax on Sale of Goods or Properties. -
(A) Rate and Base of Tax. - There shall be levied, assessed and collected on every sale,
barter or exchange of goods or properties, value-added tax equivalent to ten percent
(10%) of the gross selling price or gross value in money of the goods or properties
sold, bartered or exchanged, such tax to be paid by the seller or transferor.
(1) The term "goods" or "properties" shall mean all tangible and intangible objects
which are capable of pecuniary estimation and shall include: (a) Real properties held
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ATTY. DEBORAH S.
primarily for sale to customers or held for lease in the ordinary course of trade or
business; (b) The right or the privilege to use patent, copyright, design or model,
plan, secret formula or process, goodwill, trademark, trade brand or other like
property or right; (c) The right or the privilege to use in the Philippines of any
industrial, commercial or scientific equipment; (d) The right or the privilege to use
motion picture films, tapes and discs; and (e) Radio, television, satellite transmission
and cable television time.
The term "gross selling price" means the total amount of money or its equivalent
which the purchaser pays or is obligated to pay to the seller in consideration of the
sale, barter or exchange of the goods or properties, excluding the value-added tax.
The excise tax, if any, on such goods or properties shall form part of the gross selling
price.
(2) The following sales by VAT-registered persons shall be subject to zero percent
(0%) rate:
(a) Export Sales. - The term "export sales" means:
(1) The sale and actual shipment of goods from the
Philippines to a foreign country, irrespective of any
shipping arrangement that may be agreed upon which may
influence or determine the transfer of ownership of the
goods so exported and paid for in acceptable foreign
currency or its equivalent in goods or services, and
accounted for in accordance with the rules and regulations
of the Bangko Sentral ng Pilipinas (BSP);
(2) Sale of raw materials or packaging materials to a
nonresident buyer for delivery to a resident local export-
oriented enterprise to be used in manufacturing,
processing, packing or repacking in the Philippines of the
said buyer's goods and paid for in acceptable foreign
currency and accounted for in accordance with the rules
and regulations of the Bangko Sentral ng Pilipinas (BSP);
(3) Sale of raw materials or packaging materials to export-
oriented enterprise whose export sales exceed seventy
percent (70%) of total annual production;
(4) Sale of gold to the Bangko Sentral ng Pilipinas (BSP);
and
(5) Those considered export sales under Executive Order
TAXATION II
No. 226, otherwise known as the Omnibus Investment
Code of 1987, and other special laws.
(b) Foreign Currency Denominated Sale. - The phrase "foreign currency
denominated sale" means sale to a nonresident of goods, except those
mentioned in Sections 149 and 150, assembled or manufactured in the
Philippines for delivery to a resident in the Philippines, paid for in
acceptable foreign currency and accounted for in accordance with the
rules and regulations of the Bangko Sentral ng Pilipinas (BSP).
(c) Sales to persons or entities whose exemption under special laws or
international agreements to which the Philippines is a signatory
effectively subjects such sales to zero rate.
(B) Transactions Deemed Sale. - The following transactions shall be deemed sale: (1)
Transfer, use or consumption not in the course of business of goods or properties
originally intended for sale or for use in the course of business;(2) Distribution or
transfer to: (a) Shareholders or investors as share in the profits of the VAT-registered
persons; or (b) Creditors in payment of debt; (3) Consignment of goods if actual sale
is not made within sixty (60) days following the date such goods were consigned;
and(4) Retirement from or cessation of business, with respect to inventories of
taxable goods existing as of such retirement or cessation.
(C) Changes in or Cessation of Status of a VAT-registered Person. - The tax imposed
in Subsection (A) of this Section shall also apply to goods disposed of or existing as of
a certain date if under circumstances to be prescribed in rules and regulations to be
promulgated by the Secretary of Finance, upon recommendation of the
Commissioner, the status of a person as a VAT-registered person changes or is
terminated.
(D) Determination of the Tax. - (1) The tax shall be computed by multiplying the total
amount indicated in the invoice by one-eleventh (1/11).
(2) Sales Returns, Allowances and Sales Discounts. - The value of goods or properties
sold and subsequently returned or for which allowances were granted by a VAT-
registered person may be deducted from the gross sales or receipts for the quarter in
which a refund is made or a credit memorandum or refund is issued.
Sales discount granted and indicated in the invoice at the time of sale and the grant
of which does not depend upon the happening of a future event may be excluded
from the gross sales within the same quarter it was given.
(3) Authority of the Commissioner to Determine the Appropriate Tax Base. - The
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ATTY. DEBORAH S. ACOSTA-CAJUSTIN
Commissioner shall, by rules and regulations prescribed by the Secretary of Finance,
determine the appropriate tax base in cases where a transaction is deemed a sale,
barter or exchange of goods or properties under Subsection (B) hereof, or where the
gross selling price is unreasonably lower than the actual market value.
SEC. 107. Value-Added Tax on Importation of Goods. -
(A) In General. - There shall be levied, assessed and collected on every importation of
goods a value-added tax equivalent to ten percent (10%) based on the total value used
by the Bureau of Customs in determining tariff and customs duties plus customs
duties, excise taxes, if any, and other charges, such tax to be paid by the importer
prior to the release of such goods from customs custody: Provided, That where the
customs duties are determined on the basis of the quantity or volume of the goods,
the value-added tax shall be based on the landed cost plus excise taxes, If any.
(B) Transfer of Goods by Tax-Exempt Persons. - In the case of tax-free importation of
goods into the Philippines by persons, entities or agencies exempt from tax where
such goods are subsequently sold, transferred or exchanged in the Philippines to
non-exempt persons or entities, the purchasers, transferees or recipients shall be
considered the importers thereof, who shall be liable for any internal revenue tax on
such importation.
The tax due on such importation shall constitute a lien on the goods superior to all
charges or liens on the goods, irrespective of the possessor thereof.
SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. -
(A) Rate and Base of Tax. - There shall be levied, assessed and collected, a value-
added tax equivalent to ten percent (10%) of gross receipts derived from the sale or
exchange of services, including the use or lease of properties.
The phrase "sale or exchange of services" means the performance of all kinds or
services in the Philippines for others for a fee, remuneration or consideration,
including those performed or rendered by construction and service contractors;
stock, real estate, commercial, customs and immigration brokers; lessors of property,
whether personal or real; warehousing services; lessors or distributors of
cinematographic films; persons engaged in milling processing, manufacturing or
repacking goods for others; proprietors, operators or keepers of hotels, motels,
resthouses, pension houses, inns, resorts; proprietors or operators of restaurants,
refreshment parlors, cafes and other eating places, including clubs and caterers;
dealers in securities; lending investors; transportation contractors on their transport
of goods or cargoes, including persons who transport goods or cargoes for hire
TAXATION II
another domestic common carriers by land, air and water relative to their transport
of goods or cargoes; services of franchise grantees of telephone and telegraph, radio
and television broadcasting and all other franchise grantees except those under
Section 119 of this Code; services of banks, non-bank financial intermediaries and
finance companies; and non-life insurance companies (except their crop insurances),
including surety, fidelity, indemnity and bonding companies; and similar services
regardless of whether or not the performance thereof calls for the exercise or use of
the physical or mental faculties.
The phrase 'sale or exchange of services' shall likewise include:
(1) The lease or the use of or the right or privilege to use any copyright,
patent, design or model, plan secret formula or process, goodwill,
trademark, trade brand or other like property or right;
(2) The lease of the use of, or the right to use of any industrial,
commercial or scientific equipment;
(3) The supply of scientific, technical, industrial or commercial
knowledge or information;(4) The supply of any assistance that is
ancillary and subsidiary to and is furnished as a means of enabling the
application or enjoyment of any such property, or right as is mentioned
in subparagraph (2) or any such knowledge or information as is
mentioned in subparagraph (3);(5) The supply of services by a
nonresident person or his employee in connection with the use of
property or rights belonging to, or the installation or operation of any
brand, machinery or other apparatus purchased from such nonresident
person.
(6) The supply of technical advice, assistance or services rendered in connection with
technical management or administration of any scientific, industrial or commercial
undertaking, venture, project or scheme;(7) The lease of motion picture films, films,
tapes and discs; and(8) The lease or the use of or the right to use radio, television,
satellite transmission and cable television time.
Lease of properties shall be subject to the tax herein imposed irrespective of the place
where the contract of lease or licensing agreement was executed if the property is
leased or used in the Philippines.
The term "gross receipts" means the total amount of money or its equivalent
representing the contract price, compensation, service fee, rental or royalty,
including the amount charged for materials supplied with the services and deposits
and advanced payments actually or constructively received during the taxable
quarter for the services performed or to be performed for another person, excluding
value-added tax.
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ATTY. DEBORAH S. ACOSTA-CAJUSTIN
(B) Transactions Subject to Zero Percent (0%) Rate.- The following services
performed in the Philippines by VAT- registered persons shall be subject to zero
percent (0%) rate.
(1) Processing, manufacturing or repacking goods for other persons doing business
outside the Philippines which goods are subsequently exported, where the services
are paid for in acceptable foreign currency and accounted for in accordance with the
rules and regulations of the Bangko Sentral ng Pilipinas (BSP);(2) Services other
than those mentioned in the preceding paragraph, the consideration for which is paid
for in acceptable foreign currency and accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP);(3) Services rendered to persons
or entities whose exemption under special laws or international agreements to which
the Philippines is a signatory effectively subjects the supply of such services to zero
percent (0%) rate;(4) Services rendered to vessels engaged exclusively in
international shipping; and(5) Services performed by subcontractors and/or
contractors in processing, converting, of manufacturing goods for an enterprise
whose export sales exceed seventy percent (70%) of total annual production.
(C) Determination of the Tax. - The tax shall be computed by multiplying the total
amount indicated in the official receipt by one-eleventh (1/11).
SEC. 109. Exempt Transactions. - The following shall be exempt from the value-
added tax:
(a) Sale of nonfood agricultural products; marine and forest products in
their original state by the primary producer or the owner of the land
where the same are produced;
(b) Sale of cotton seeds in their original state; and copra;
(c) Sale or importation of agricultural and marine food products in their
original state, livestock and poultry of or king generally used as, or
yielding or producing foods for human consumption; and breeding stock
and genetic materials therefor.Products classified under this paragraph
and paragraph (a) shall be considered in their original state even if they
have undergone the simple processes of preparation or preservation for
the market, such as freezing, drying, salting, broiling, roasting, smoking
or stripping.Polished and/or husked rice, corn grits, raw cane sugar and
molasses, and ordinary salt shall be considered in their original state;
(d) Sale or importation of fertilizers; seeds, seedlings and fingerlings;
fish, prawn, livestock and poultry feeds, including ingredients, whether
locally produced or imported, used in the manufacture of finished feeds
(except specialty feeds for race horses, fighting cocks, aquarium fish, zoo
animals and other animals generally considered as pets);
TAXATION II
(e) Sale or importation of coal and natural gas, in whatever form or
state, and petroleum products (except lubricating oil, processed gas,
grease, wax and petrolatum) subject to excise tax imposed under Title
VI;
(f) Sale or importation of raw materials to be used by the buyer or
importer himself in the manufacture of petroleum products subject to
excise tax, except lubricating oil, processed gas, grease, wax and
petrolatum;
(g) Importation of passenger and/or cargo vessels of more than five
thousand tons (5,000) whether coastwise or ocean-going, including
engine and spare parts of said vessel to be used by the importer himself
as operator thereof;
(h) Importation of personal and household effects belonging to the
residents of the Philippines returning from abroad and nonresident
citizens coming to resettle in the Philippines: Provided, That such goods
are exempt from customs duties under the Tariff and Customs Code of
the Philippines;
(i) Importation of professional instruments and implements, wearing
apparel, domestic animals, and personal household effects (except any
vehicle, vessel, aircraft, machinery other goods for use in the
manufacture and merchandise of any kind in commercial quantity)
belonging to persons coming to settle in the Philippines, for their own
use and not for sale, barter or exchange, accompanying such persons, or
arriving within ninety (90) days before or after their arrival, upon the
production of evidence satisfactory to the Commissioner, that such
persons are actually coming to settle in the Philippines and that the
change of residence is bona fide;
(j) Services subject to percentage tax under Title V;
(k) Services by agricultural contract growers and milling for others of
palay into rice, corn into grits and sugar cane into raw sugar;
(l) Medical, dental, hospital and veterinary services subject to the
provisions of Section 17 of Republic Act No. 7716, as amended;
(m) Educational services rendered by private educational institutions,
duly accredited by the Department of Education, Culture and Sports
(DECS) and the Commission on Higher Education (CHED), and those
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ATTY. DEBORAH S. ACOSTA-CAJUSTIN
rendered by government educational institutions;
(n) Sale by the artist himself of his works of art, literary works, musical
compositions and similar creations, or his services performed for the
production of such works;
(o) Services rendered by individuals pursuant to an employer-employee
relationship;
(p) Services rendered by regional or area headquarters established in
the Philippines by multinational corporations which act as supervisory,
communications and coordinating centers for their affiliates,
subsidiaries or branches in the Asia-Pacific Region and do not earn or
derive income from the Philippines;
(q) Transactions which are exempt under international agreements to
which the Philippines is a signatory or under special laws, except those
under Presidential Decree Nos. 66, 529 and 1590;
(r) Sales by agricultural cooperatives duly registered with the
Cooperative Development Authority to their members as well as sale of
their produce, whether in its original state or processed form, to non-
members; their importation of direct farm inputs, machineries and
equipment, including spare parts thereof, to be used directly and
exclusively in the production and/or processing of their produce;
(s) Sales by electric cooperatives duly registered with the Cooperative
Development authority or National Electrification Administration,
relative to the generation and distribution of electricity as well as their
importation of machineries and equipment, including spare parts, which
shall be directly used in the generation and distribution of electricity;
(t) Gross receipts from lending activities by credit or multi-purpose
cooperatives duly registered with the Cooperative Development
Authority whose lending operation is limited to their members;
(u) Sales by non-agricultural, non- electric and non-credit cooperatives
duly registered with the Cooperative Development
Authority: Provided, That the share capital contribution of each member
does not exceed Fifteen thousand pesos (P15,000) and regardless of the
aggregate capital and net surplus ratably distributed among the
members;
TAXATION II
(v) Export sales by persons who are not VAT-registered;
(w) Sale of real properties not primarily held for sale to customers or
held for lease in the ordinary course of trade or business or real property
utilized for low-cost and socialized housing as defined by Republic Act
No. 7279, otherwise known as the Urban Development and Housing Act
of 1992, and other related laws, house and lot and other residential
dwellings valued at One million pesos (P1,000,000) and
below: Provided, That not later than January 31st of the calendar year
subsequent to the effectivity of this Act and each calendar year
thereafter, the amount of One million pesos (P1,000,000) shall be
adjusted to its present value using the Consumer Price Index, as
published by the national Statistics Office (NSO);
(x) Lease of a residential unit with a monthly rental not exceeding Eight
thousand pesos (P8,000); Provided, That not later than January 31st of
the calendar year subsequent to the effectivity of Republic Act No. 8241
and each calendar year thereafter, the amount of Eight thousand pesos
(P8,000) shall be adjusted to its present value using the Consumer Price
Index as published by the National Statistics Office (NS0);
(y) Sale, importation, printing or publication of books and any
newspaper, magazine review or bulletin which appears at regular
intervals with fixed prices for subscription and sale and which is not
devoted principally to the publication of paid advertisements; and
(z) Sale or lease of goods or properties or the performance of services
other than the transactions mentioned in the preceding paragraphs, the
gross annual sales and/or receipts do not exceed the amount of Five
hundred fifty thousand pesos (P550,000): Provided, That not later than
January 31st of the calendar year subsequent to the effectivity of
Republic Act No. 8241 and each calendar year thereafter, the amount of
Five hundred fifty thousand pesos (550,000) shall be adjusted to its
present value using the Consumer Price Index, as published by the
National Statistics Office (NSO).
The foregoing exemptions to the contrary notwithstanding, any person whose sale of
goods or properties or services which are otherwise not subject to VAT, but who
issues a VAT invoice or receipt therefor shall, in addition to his liability to other
applicable percentage tax, if any, be liable to the tax imposed in Section 106 or 108
without the benefit of input tax credit, and such tax shall also be recognized as input
tax credit to the purchaser under Section 110, all of this Code.
SEC. 110. Tax Credits. - succeeding quarter or quarters.
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ATTY. DEBORAH S. ACOSTA-CAJUSTIN
(A) Creditable Input Tax. - (1) Any input tax evidenced by a VAT invoice or official
receipt issued in accordance with Section 113 hereof on the following transactions
shall be creditable against the output tax: (a) Purchase or importation of goods:
(i) For sale; or
(ii) For conversion into or intended to form part of a finished product
for sale including packaging materials; or
(iii) For use as supplies in the course of business; or
(iv) For use as materials supplied in the sale of service; or
(v) For use in trade or business for which deduction for depreciation or
amortization is allowed under this Code, except automobiles, aircraft
and yachts.
(b) Purchase of services on which a value-added tax has been actually paid.
(2) The input tax on domestic purchase of goods or properties shall be creditable: (a)
To the purchaser upon consummation of sale and on importation of goods or
properties; and (b) To the importer upon payment of the value-added tax prior to the
release of the goods from the custody of the Bureau of Customs.
However, in the case of purchase of services, lease or use of properties, the input tax
shall be creditable to the purchaser, lessee or licensee upon payment of the
compensation, rental, royalty or fee.
(3) A VAT-registered person who is also engaged in transactions not subject to the
value-added tax shall be allowed tax credit as follows: (a) Total input tax which can
be directly attributed to transactions subject to value-added tax; and (b) A ratable
portion of any input tax which cannot be directly attributed to either activity.
The term "input tax" means the value-added tax due from or paid by a VAT-
registered person in the course of his trade or business on importation of goods or
local purchase of goods or services, including lease or use of property, from a VAT-
registered person.
It shall also include the transitional input tax determined in accordance with Section
111 of this Code.The term "output tax" means the value-added tax due on the sale or
lease of taxable goods or properties or services by any person registered or required
to register under Section 236 of this Code.
(B) Excess Output or Input Tax.- If at the end of any taxable quarter the output tax
exceeds the input tax, the excess shall be paid by the VAT-registered person.
If the input tax exceeds the output tax, the excess shall be carried over to the
TAXATION II
any input tax attributable to the purchase of capital goods or to zero-rated sales by a
VAT-registered person may at his option be refunded or credited against other
internal revenue taxes, subject to the provisions of Section 112.
(C) Determination of Creditable Input Tax.- The sum of the excess input tax carried
over from the preceding month or quarter and the input tax creditable to a VAT-
registered person during the taxable month or quarter shall be reduced by the
amount of claim for refund or tax credit for value-added tax and other adjustments,
such as purchase returns or allowances and input tax attributable to exempt
sale. cralaw
The claim for tax credit referred to in the foregoing paragraph shall include not only
those filed with the Bureau of Internal Revenue but also those filed with other
government agencies, such as the Board of Investments the Bureau of Customs.
SEC. 111. Transitional/Presumptive Input Tax Credits. -
(A) Transitional Input Tax Credits.- A person who becomes liable to value-added tax
or any person who elects to be a VAT-registered person shall, subject to the filing of
an inventory according to rules and regulations prescribed by the Secretary of
finance, upon recommendation of the Commissioner, be allowed input tax on his
beginning inventory of goods, materials and supplies equivalent for eight percent
(8%) of the value of such inventory or the actual value-added tax paid on such goods,
materials and supplies, whichever is higher, which shall be creditable against the
output tax. cralaw
(B) Presumptive Input Tax Credits. -
(1) Persons or firms engaged in the processing of sardines, mackerel and
milk, and in manufacturing refined sugar and cooking oil, shall be
allowed a presumptive input tax, creditable against the output tax,
equivalent to one and one-half percent (1 1/2%) of the gross value in
money of their purchases of primary agricultural products which are
used as inputs to their production.As used in this Subsection, the
term "processing" shall mean pasteurization, canning and activities
which through physical or chemical process alter the exterior texture or
form or inner substance of a product in such manner as to prepare it for
special use to which it could not have been put in its original form or
condition.
(2) Public works contractors shall be allowed a presumptive input tax
equivalent to one and one-half percent (1 1/2%) of the contract price
with respect to government contracts only in lieu of actual input taxes
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ATTY. DEBORAH S. ACOSTA-CAJUSTIN
therefrom.
SEC. 112. Refunds or Tax Credits of Input Tax. -
(A) Zero-Rated or Effectively Zero-Rated Sales.- any VAT-registered person, whose
sales are zero-rated or effectively zero-rated may, within two (2) years after the close
of the taxable quarter when the sales were made, apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid attributable to such sales,
except transitional input tax, to the extent that such input tax has not been applied
against output tax: Provided, however, That in the case of zero-rated sales under
Section 106(A)(2)(a)(1), (2) and (B) and Section 108 (B)(1) and (2), the acceptable
foreign currency exchange proceeds thereof had been duly accounted for in
accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP):
Provided, further, That where the taxpayer is engaged in zero-rated or effectively
zero-rated sale and also in taxable or exempt sale of goods of properties or services,
and the amount of creditable input tax due or paid cannot be directly and entirely
attributed to any one of the transactions, it shall be allocated proportionately on the
basis of the volume of sales. cralaw
(B) Capital Goods.- A VAT-registered person may apply for the issuance of a tax
credit certificate or refund of input taxes paid on capital goods imported or locally
purchased, to the extent that such input taxes have not been applied against output
taxes.
The application may be made only within two (2) years after the close of the taxable
quarter when the importation or purchase was made.
(C) Cancellation of VAT Registration. - A person whose registration has been
cancelled due to retirement from or cessation of business, or due to changes in or
cessation of status under Section 106(C) of this Code may, within two (2) years from
the date of cancellation, apply for the issuance of a tax credit certificate for any
unused input tax which may be used in payment of his other internal revenue taxes.
(D) Period Within Which Refund or Tax Credit of Input Taxes Shall be Made. - In
proper cases, the Commissioner shall grant a refund or issue the tax credit certificate
for creditable input taxes within one hundred twenty (120) days from the date of
submission of compete documents in support of the application filed in accordance
with Subsections (A) and (B) hereof.
In case of full or partial denial of the claim for tax refund or tax credit, or the failure
on the part of the Commissioner to act on the application within the period
prescribed above, the taxpayer affected may, within thirty (30) days from the receipt
of the decision denying the claim or after the expiration of the one hundred twenty
TAXATION II
day-period, appeal the decision or the unacted claim with the Court of Tax Appeals.
(E) Manner of Giving Refund. - Refunds shall be made upon warrants drawn by the
Commissioner or by his duly authorized representative without the necessity of being
countersigned by the Chairman, Commission on audit, the provisions of the
Administrative Code of 1987 to the contrary notwithstanding: Provided, That refunds
under this paragraph shall be subject to post audit by the Commission on Audit.
CHAPTER II
COMPLIANCE REQUIREMENTS
SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. -
(A) Invoicing Requirements. - A VAT-registered person shall, for every sale, issue an
invoice or receipt.
In addition to the information required under Section 237, the following information
shall be indicated in the invoice or receipt:
(1) A statement that the seller is a VAT-registered person, followed by his taxpayer's
identification number (TIN); and(2) The total amount which the purchaser pays or is
obligated to pay to the seller with the indication that such amount includes the value-
added tax.
(B) Accounting Requirements. - Notwithstanding the provisions of Section 233, all
persons subject to the value-added tax under Sections 106 and 108 shall, in addition
to the regular accounting records required, maintain a subsidiary sales journal and
subsidiary purchase journal on which the daily sales and purchases are recorded.
The subsidiary journals shall contain such information as may be required by the
Secretary of Finance.
SEC. 114. Return and Payment of Value-Added Tax. -
(A) In General. - Every person liable to pay the value-added tax imposed under this
Title shall file a quarterly return of the amount of his gross sales or receipts within
twenty-five (25) days following the close of each taxable quarter prescribed for each
taxpayer: Provided, however, That VAT-registered persons shall pay the value-added
tax on a monthly basis. cralaw
Any person, whose registration has been cancelled in accordance with Section 236,
shall file a return and pay the tax due thereon within twenty-five (25) days from the
date of cancellation of registration: Provided, That only one consolidated return shall
7 2013400036.Diato
ATTY. DEBORAH S. ACOSTA-CAJUSTIN
be filed by the taxpayer for his principal place of business or head office and all
branches. cralaw
(B) Where to File the Return and Pay the Tax. - Except as the Commissioner
otherwise permits, the return shall be filed with and the tax paid to an authorized
agent bank, Revenue Collection Officer or duly authorized city or municipal
Treasurer in the Philippines located within the revenue district where the taxpayer is
registered or required to register. cralaw
(C) Withholding of Creditable Value-Added Tax. - The Government or any of its
political subdivisions, instrumentalities or agencies, including government-owned or
-controlled corporations (GOCCs) shall, before making payment on account of each
purchase of goods from sellers and services rendered by contractors which are
subject to the value-added tax imposed in Sections 106 and 108 of this Code, deduct
and withhold the value-added tax due at the rate of three percent (3%) of the gross
payment for the purchase of goods and six percent (6%) on gross receipts for services
rendered by contractors on every sale or installment payment which shall be
creditable against the value-added tax liability of the seller or contractor: Provided,
however, That in the case of government public works contractors, the withholding
rate shall be eight and one-half percent (8.5%): Provided, further, That the payment
for lease or use of properties or property rights to nonresident owners shall be
subject to ten percent (10%) withholding tax at the time of payment.
For this purpose, the payor or person in control of the payment shall be considered
as the withholding agent. cralaw
The value-added tax withheld under this Section shall be remitted within ten (10)
days following the end of the month the withholding was made. cralaw
SEC. 115. Power of the Commissioner to Suspend the Business Operations of a
Taxpayer. - The Commissioner or his authorized representative is hereby empowered
to suspend the business operations and temporarily close the business establishment
of any person for any of the following violations:
(a) In the case of a VAT-registered Person. -
(1) Failure to issue receipts or invoices;
(2) Failure to file a value-added tax return as required under Section
114; or
(3) Understatement of taxable sales or receipts by thirty percent (30%)
or more of his correct taxable sales or receipts for the taxable quarter.
(b) Failure of any Person to Register as Required under Section 236. - The temporary
closure of the establishment shall be for the duration of not less than five (5) days
TAXATION II ATTY. DEBORAH S. ACOSTA-CAJUSTIN

1. Manila and other cities P 3,600

and shall be lifted only upon compliance with whatever requirements prescribed by
the Commissioner in the closure order 2. Provincial 2,400
Car for hire (with chauffer) 3,000
OTHER PERCENTAGE TAXES Car for hire (without chauffer) 1,800
SEC. 118. Percentage Tax on International Carriers. -
TITLE V (A) International air carriers doing business in the Philippines shall pay
OTHER PERCENTAGE TAXES a tax of three percent (3%) of their quarterly gross receipts. cralaw

SEC. 116. Tax on Persons Exempt From Value-Added Tax (VAT). - Any person whose (B) International shipping carriers doing business in the Philippines
sales or receipts are exempt under Section 109(z) of this Code from the payment of shall pay a tax equivalent to three percent (3%) of their quarterly gross
value-added tax and who is not a VAT-registered person shall pay a tax equivalent to receipts. cralaw
three percent (3%) of his gross quarterly sales or receipts: Provided, That SEC. 119. Tax on Franchises. - Any provision of general or special law to the contrary
cooperatives shall be exempt from the three percent (3%)gross receipts tax herein notwithstanding, there shall be levied, assessed and collected in respect to all
imposed. franchises on radio and/or television broadcasting companies whose annual gross
SEC. 117. Percentage Tax on Domestic Carriers and Keepers of Garages. - Cars for receipts of the preceding year does not exceed Ten million pesos (P10,000.00),
rent or hire driven by the lessee, transportation contractors, including persons who subject to Section 236 of this Code, a tax of three percent (3%) and on electric, gas
transport passengers for hire, and other domestic carriers by land, air or water, for and water utilities, a tax of two percent (2%) on the gross receipts derived from the
the transport of passengers, except owners of bancas and owner of animal-drawn two business covered by the law granting the franchise: Provided, however, That radio
wheeled vehicle, and keepers of garages shall pay a tax equivalent to three percent and television broadcasting companies referred to in this Section shall have an
(3%) of their quarterly gross receipts. cralaw option to be registered as a value-added taxpayer and pay the tax due thereon:
Provided, further, That once the option is exercised, it shall not be revoked. cralaw
The gross receipts of common carriers derived from their incoming and outgoing
freight shall not be subjected to the local taxes imposed under Republic Act No. 7160, The grantee shall file the return with, and pay the tax due thereon to the
otherwise known as the Local Government Code of 1991. cralaw Commissioner or his duly authorized representative, in accordance with the
provisions of Section 128 of this Code, and the return shall be subject to audit by the
In computing the percentage tax provided in this Section, the following shall be Bureau of Internal Revenue, any provision of any existing law to the contrary
considered the minimum quarterly gross receipts in each particular case: notwithstanding. cralaw
Jeepney for hire - SEC. 120. Tax on Overseas Dispatch, Message or Conversation Originating from the
Philippines. -
1. Manila and other cities P 2,400
2. Provincial 1,200 (A) Persons Liable. - There shall be collected upon every overseas dispatch, message
or conversation transmitted from the Philippines by telephone, telegraph, telewriter
Public utility bus - exchange, wireless and other communication equipment service, a tax of ten percent
Not exceeding 30 passengers 3,600 (10%) on the amount paid for such services.
Exceeding 30 but not exceeding 50 passengers 6,000 The tax imposed in this Section shall be payable by the person paying for the services
Exceeding 50 passengers 7,200 rendered and shall be paid to the person rendering the services who is required to
Taxis - collect and pay the tax within twenty (20) days after the end of each quarter. cralaw

8
TAXATION II
(B) Exemptions. - The tax imposed by this Section shall not apply to:
(1) Government. - Amounts paid for messages transmitted by the Government of the
Republic of the Philippines or any of its political subdivisions or instrumentalities;
(2) Diplomatic Services. - Amounts paid for messages transmitted by any embassy
and consular offices of a foreign government; (3) International Organizations. -
Amounts paid for messages transmitted by a public international organization or any
of its agencies based in the Philippines enjoying privileges, exemptions and
immunities which the Government of the Philippines is committed to recognize
pursuant to an international agreement; and (4) News Services. - Amounts paid for
messages from any newspaper, press association, radio or television newspaper,
broadcasting agency, or newstickers services, to any other newspaper, press
association, radio or television newspaper broadcasting agency, or newsticker service
or to a bona fide correspondent, which messages deal exclusively with the collection
of news items for, or the dissemination of news item through, public press, radio or
television broadcasting or a newsticker service furnishing a general news service
similar to that of the public press.
SEC. 121. Tax on Banks and Non-Bank Financial Intermediaries. - There shall be a
collected tax on gross receipts derived from sources within the Philippines by all
banks and non-bank financial intermediaries in accordance with the following
schedule:
(a) On interest, commissions and discounts from lending activities as
well as income from financial leasing, on the basis of remaining
maturities of instruments from which such receipts are derived:
Short-term maturity (non in excess of two (2) years) 5%
Medium-term maturity (over two (2) years but not
exceeding four (4) years) 3%
Long-term maturity -
(1) Over four (4) years but not exceeding seven
(7) years 1%
(2) Over seven (7) years 0%.
(b) On dividends 0%
(c) On royalties, rentals of property, real or personal, profits, from
exchange and all other items treated as gross income under Section 32
of this Code 5%.
Provided, however, That in case the maturity period referred to in paragraph (a) is
shortened thru pretermination, then the maturity period shall be reckoned to end as
9 2013400036.Diato
ATTY. DEBORAH S. ACOSTA-CAJUSTIN
of the date of pretermination for purposes of classifying the transaction as short,
medium or long-term and the correct rate of tax shall be applied accordingly.
Nothing in this Code shall preclude the Commissioner from imposing the same tax
herein provided on persons performing similar banking activities. cralaw
SEC. 122. Tax on Finance Companies. - There shall be collected a tax of five percent
(5%) on the gross receipts derived by all finance companies, as well as by other
financial intermediaries not performing quasi-banking functions dong business in
the Philippines, from interest, discounts and all other items treated as gross income
under this Code: Provided, That interests, commissions and discounts from lending
activities, as well as income from financial leasing, shall be taxed on the basis of the
remaining maturities of the instruments from which such receipts are derived, in
accordance with the following schedule:
Short-term maturity (non in excess of two (2) years) 5% Medium-term maturity (over
two (2) years but not exceeding four (4) years) 3% Long-term maturity -
(1) Over four (4) years but not exceeding seven (7) 1%
(2) Over seven (7) years 0%
Provided, however, That in case the maturity period is shortened thru
pretermination, then the maturity period shall be reckoned to end as of the date of
pretermination for purposes of classifying the transaction as short, medium or long-
term and the correct rate of tax shall be applied accordingly.
Nothing in this Code shall preclude the Commissioner from imposing the same tax
herein provided on persons performing similar financing activities. cralaw
SEC. 123. Tax on Life Insurance Premiums. - There shall be collected from every
person, company or corporation (except purely cooperative companies or
associations) doing life insurance business of any sort in the Philippines a tax of five
percent (5%) of the total premium collected, whether such premiums are paid in
money, notes, credits or any substitute for money; but premiums refunded within six
(6) months after payment on account of rejection of risk or returned for other reason
to a person insured shall not be included in the taxable receipts; nor shall any tax be
paid upon reinsurance by a company that has already paid the tax; nor upon doing
business outside the Philippines on account of any life insurance of the insured who
is a nonresident, if any tax on such premium is imposed by the foreign country where
the branch is established nor upon premiums collected or received on account of any
reinsurance , if the insured, in case of personal insurance, resides outside the
Philippines, if any tax on such premiums is imposed by the foreign country where the
original insurance has been issued or perfected; nor upon that portion of the
premiums collected or received by the insurance companies on variable contracts (as
defined in section 232(2) of Presidential Decree No. 612), in excess of the amounts
TAXATION II
necessary to insure the lives of the variable contract workers. cralaw
Cooperative companies or associations are such as are conducted by the members
thereof with the money collected from among themselves and solely for their own
protection and not for profit. cralaw
SEC. 124. Tax on Agents of Foreign Insurance Companies. - Every fire, marine or
miscellaneous insurance agent authorized under the Insurance Code to procure
policies of insurance as he may have previously been legally authorized to transact on
risks located in the Philippines for companies not authorized to transact business in
the Philippines shall pay a tax equal to twice the tax imposed in Section
123: Provided, That the provision of this Section shall not apply to
reinsurance: Provided, however, That the provisions of this Section shall not affect
the right of an owner of property to apply for and obtain for himself policies in
foreign companies in cases where said owner does not make use of the services of any
agent, company or corporation residing or doing business in the Philippines.
In all cases where owners of property obtain insurance directly with foreign
companies, it shall be the duty of said owners to report to the Insurance
Commissioner and to the Commissioner each case where insurance has been so
effected, and shall pay the tax of five percent (5%) on premiums paid, in the manner
required by Section 123. cralaw
SEC. 125. Amusement Taxes. - There shall be collected from the proprietor, lessee or
operator of cockpits, cabarets, night or day clubs, boxing exhibitions, professional
basketball games, Jai-Alai and racetracks, a tax equivalent to:
(a) Eighteen percent (18%) in the case of cockpits;(b) Eighteen percent (18%) in the
case of cabarets, night or day clubs;(c) Ten percent (10%) in the case of boxing
exhibitions: Provided, however, That boxing exhibitions wherein World or Oriental
Championships in any division is at stake shall be exempt from amusement tax:
Provided, further, That at least one of the contenders for World or Oriental
Championship is a citizen of the Philippines and said exhibitions are promoted by a
citizen/s of the Philippines or by a corporation or association at least sixty percent
(60%) of the capital of which is owned by such citizens;(d) Fifteen percent (15%) in
the case of professional basketball games as envisioned in Presidential Decree No.
871: Provided, however, That the tax herein shall be in lieu of all other percentage
taxes of whatever nature and description; and(e) Thirty percent (30%) in the case of
Jai-Alai and racetracks of their gross receipts, irrespective, of whether or not any
amount is charged for admission.
For the purpose of the amusement tax, the term "gross receipts" embraces all the
10
ATTY. DEBORAH S. ACOSTA-CAJUSTIN
receipts of the proprietor, lessee or operator of the amusement place.
Said gross receipts also include income from television, radio and motion picture
rights, if any.
A person or entity or association conducting any activity subject to the tax herein
imposed shall be similarly liable for said tax with respect to such portion of the
receipts derived by him or it.
The taxes imposed herein shall be payable at the end of each quarter and it shall be
the duty of the proprietor, lessee or operator concerned, as well as any party liable,
within twenty (20) days after the end of each quarter, to make a true and complete
return of the amount of the gross receipts derived during the preceding quarter and
pay the tax due thereon. cralaw
SEC. 126. Tax on Winnings. - Every person who wins in horse races shall pay a tax
equivalent to ten percent (10%) of his winnings or 'dividends', the tax to be based on
the actual amount paid to him for every winning ticket after deducting the cost of the
ticket: Provided, That in the case of winnings from double, forecast/quinella and
trifecta bets, the tax shall be four percent (4%).
In the case of owners of winning race horses, the tax shall be ten percent (10%) of the
prizes. cralaw
The tax herein prescribed shall be deducted from the 'dividends' corresponding to
each winning ticket or the "prize" of each winning race horse owner and withheld by
the operator, manager or person in charge of the horse races before paying the
dividends or prizes to the persons entitled thereto. cralaw
The operator, manager or person in charge of horse races shall, within twenty (20)
days from the date the tax was deducted and withheld in accordance with the second
paragraph hereof, file a true and correct return with the Commissioner in the manner
or form to be prescribed by the Secretary of Finance, and pay within the same period
the total amount of tax so deducted and withheld. cralaw
SEC. 127. Tax on Sale, Barter or Exchange of Shares of Stock Listed and Traded
Through the Local Stock Exchange or Through Initial Public Offering. -
(A) Tax on Sale, Barter or Exchange of Shares of Stock Listed and Traded Through
the Local Stock Exchange. - There shall be levied, assessed and collected on every
sale, barter, exchange, or other disposition of shares of stock listed and traded
through the local stock exchange other than the sale by a dealer in securities, a tax at
the rate of one-half of one percent (1/2 of 1%) of the gross selling price or gross value
in money of the shares of stock sold, bartered, exchanged or otherwise disposed
TAXATION II
which shall be paid by the seller or transferor. cralaw
(B) Tax on Shares of Stock Sold or Exchanged Through Initial Public Offering. -
There shall be levied, assessed and collected on every sale, barter, exchange or other
disposition through initial public offering of shares of stock in closely held
corporations, as defined herein, a tax at the rates provided hereunder based on the
gross selling price or gross value in money of the shares of stock sold, bartered,
exchanged or otherwise disposed in accordance with the proportion of shares of stock
sold, bartered, exchanged or otherwise disposed to the total outstanding shares of
stock after the listing in the local stock exchange:
Up to twenty-five percent (25%)& 4%
Over twenty-five percent (25%) but not over thirty-three and one third
percent (33 1/3%) 2%
Over thirty-three and one third percent (33 1/3%) 1%
The tax herein imposed shall be paid by the issuing corporation in primary offering
or by the seller in secondary offering.
For purposes of this Section, the term "closely held corporation" means any
corporation at least fifty percent (50%) in value of outstanding capital stock or at
least fifty percent (505) of the total combined voting power of all classes of stock
entitled to vote is owned directly or indirectly by or for not more than twenty (20)
individuals. cralaw
For purposes of determining whether the corporation is a closely held corporation,
insofar as such determination is based on stock ownership, the following rules shall
be applied:
(1) Stock Not Owned by Individuals. - Stock owned directly or indirectly
by or for a corporation, partnership, estate or trust shall be considered
as being owned proportionately by its shareholders, partners or
beneficiaries.
(2) Family and Partnership Ownerships. - An individual shall be
considered as owning the stock owned, directly or indirectly, by or for
his family, or by or for his partner.
For purposes of the paragraph, the 'family of an individual' includes only
his brothers and sisters (whether by whole or half-blood), spouse,
ancestors and lineal descendants.
(3) Option. - If any person has an option acquire stock, such stock shall
be considered as owned by such person.
11
ATTY. DEBORAH S. ACOSTA-CAJUSTIN
For purposes of this paragraph, an option to acquire such an option and
each one of a series of options shall be considered as an option to
acquire such stock.
(4) Constructive Ownership as Actual Ownership. - Stock constructively
owned by reason of the application of paragraph (1) or (3) hereof shall,
for purposes of applying paragraph (1) or (2), be treated as actually
owned by such person; but stock constructively owned by the individual
by reason of the application of paragraph (2) hereof shall not be treated
as owned by him for purposes of again applying such paragraph in order
to make another the constructive owner of such stock.
(C) Return on Capital Gains Realized from Sale of Shares of Stocks. - (1) Return on
Capital Gains Realized from Sale of Shares of Stock Listed and Traded in the Local
Stock Exchange. - It shall be the duty of every stock broker who effected the sale
subject to the tax imposed herein to collect the tax and remit the same to the Bureau
of Internal Revenue within five (5) banking days from the date of collection thereof
and to submit on Mondays of each week to the secretary of the stock exchange, of
which he is a member, a true and complete return which shall contain a declaration
of all the transactions effected through him during the preceding week and of taxes
collected by him and turned over to the Bureau Of Internal Revenue.
(2) Return on Public Offerings of Share Stock. - In case of primary offering, the
corporate issuer shall file the return and pay the corresponding tax within thirty (30)
days from the date of listing of the shares of stock in the local stock exchange.
In the case of secondary offering, the provision of Subsection (C)(1) of this Section
shall apply as to the time and manner of the payment of the tax.
(D) Common Provisions. - Any gain derived from the sale, barter, exchange or other
disposition of shares of stock under this Section shall be exempt from the tax
imposed in Sections 24(C), 27(D)(2), 28(A)(8)(c), and 28(B)(5)(c) of this Code and
from the regular individual or corporate income tax.
Tax paid under this Section shall not be deductible for income tax purposes.
SEC. 128. Returns and Payment of Percentage Taxes. - (A) Returns of Gross Sales,
Receipts or Earnings and Payment of Tax. -
(1) Persons Liable to Pay Percentage Taxes. - Every person subject to the percentage
taxes imposed under this Title shall file a quarterly return of the amount of his gross
sales, receipts or earnings and pay the tax due thereon within twenty-five (25) days
after the end of each taxable quarter: Provided,That in the case of a person whose
VAT registration is cancelled and who becomes liable to the tax imposed in Section
116 of this Code, the tax shall accrue from the date of cancellation and shall be paid in
2013400036.Diato
TAXATION II ATTY. DEBORAH S. ACOSTA-CAJUSTIN

accordance with the provisions of this Section.

(2) Person Retiring from Business. - Any person retiring from a business subject to
percentage tax shall notify the nearest internal revenue officer, file his return and pay
the tax due thereon within twenty (20) days after closing his business.
(3) Exceptions. - The Commissioner may, by rules and regulations, prescribe:
(a) The time for filing the return at intervals other than the time prescribed in the
preceding paragraphs for a particular class or classes of taxpayers after considering
such factors as volume of sales, financial condition, adequate measures of security,
and such other relevant information required to be submitted under the pertinent
provisions of this Code; and
(b) The manner and time of payment of percentage taxes other than as hereinabove
prescribed, including a scheme of tax prepayment.
(4) Determination of Correct Sales or Receipts. - When it is found that a person has
failed to issue receipts or invoices, or when no return is filed, or when there is reason
to believe that the books of accounts or other records do not correctly reflect the
declarations made or to be made in a return required to be filed under the provisions
of this Code, the Commissioner, after taking into account the sales, receipts or other
taxable base of other persons engaged in similar businesses under similar situations
or circumstances, or after considering other relevant information may prescribe a
minimum amount of such gross receipts, sales and taxable base and such amount so
prescribed shall be prima facie correct for purposes of determining the internal
revenue tax liabilities of such person.
(B) Where to File. - Except as the Commissioner otherwise permits, every person
liable to the percentage tax under this Title may, at his option, file a separate return
for each branch or place of business, or a consolidated return for all branches or
places of business with the authorized agent bank, Revenue District Officer,
Collection Agent or duly authorized Treasurer of the city or municipality where said
business or principal place of business is located, as the case may be.

12