rr 16-05 - amendments

Copyright 2015 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia 2014 1

* Supersedes Revenue Regulations No. 14-2005 (dated June 22, 2005) Re:Consolidated Value-Added Tax Regulations of 2005.

Amended by Revenue Regulations No. 2-2007 (dated December 22,2006) Re: Amending Certain Provisions of Revenue Regulations No. 16-2005,Otherwise Known as the Consolidated Value-Added Tax Regulations of 2005;Revenue Regulations No. 4-2007 (dated February 7, 2007) Re: AmendingCertain Provisions of Revenue Regulations No. 16-2005, As Amended,Otherwise Known as the Consolidated Value-Added Tax Regulations of 2005;Revenue Regulations No. 10-2011 (dated July 1, 2011) Re: Amending CertainProvision of Revenue Regulations No. 16-2005 as Amended by RevenueRegulations No. 4-2007, Otherwise Known as the Consolidated Value-AddedTax Regulations of 2005, as Amended; Revenue Regulations No. 16-2011(dated October 27, 2011) Re: Increasing the Amount of Threshold Amounts forSale of Residential Lot, Sale of House and Lot, Lease of Residential Unit andSale or Lease of Goods or Properties or Performance of Services Covered bySection 109 (P), (Q) and (V) of the Tax Code of 1997, as Amended, TherebyAmending Certain Provisions of Revenue Regulations No. 16-2005, asAmended Otherwise Known as Consolidated VAT Regulations of 2005;Revenue Regulations No. 1-2012 (dated December 14, 2011) Re: Requiringthe Mandatory Submission of Quarterly Summary List of Sales and Purchases(SLSP) by All VAT Registered Taxpayer Thereby Amending Section 4.114-3of Revenue Regulations No. 16-2005, as Amended; and Revenue RegulationsNo. 13-2012 (dated October 12, 2012) Re: VAT Treatment on Sale of AdjacentResidential Lots, House and Lots or Other Residential Dwellings, TherebyAmending Certain Provisions of Revenue Regulations No. 16-2005, asAmended, Otherwise Known as Consolidated VAT Regulations of 2005.

Section 4.114-1 (B) and Section 4.109 (B) (1) (a) were expressly repealedby Section 19 of the "Joint Rules and Regulations Implementing Articles 60,61 and 144 of Republic Act No. 9520, Otherwise Known as the "PhilippineCooperative Code of 2008" in Relation to RA No. 8424 or the NationalInternal Revenue Code, as Amended", which was circularized in RevenueMemorandum Circular No. 12-2010 (dated February 11, 2010) Re:Circularizing the Full Text of Joint Rules and Regulations ImplementingArticles 60, 61 and 144 of Republic Act No. 9520, Otherwise Known as the


"Philippine Cooperative Code of 2008" in Relation to RA No. 8424 or theNational Internal Revenue Code, as Amended.

Section 4.109-1 (B) (1) (b) was clarified in Revenue MemorandumCircular No. 55-2014 (dated June 17, 2014) Re: Clarifying the Livestock andPoultry Feeds or Ingredients Used in the Manufacture of Finished Feeds to beExempt from Value-Added Tax (VAT) under Sec. 4.109-1 (B) (1) (b) ofRevenue Regulations No. 16-2005; as amended by Revenue MemorandumCircular No. 66-2014 (dated August 27, 2014) Re: Amending RevenueMemorandum Circular No. 55-2014 on the Requirement of Food and DrugAdministration (FDA) Certification for Importations of Livestock and PoultryFeeds or Ingredients. RMC 66-2014 was clarified in Revenue MemorandumCircular No. 78-2014 (dated October 24, 2014) Re: CircularizingClarifications on the Requirement of FDA Certification for the FeedIngredients Enumerated in RMC 66-2014.

See Republic Act No. 8424, as amended, entitled "An Act AmendingThe National Internal Revenue Code, As Amended, And For Other Purposes"(effective January 1, 1998), specifically, Sections 105, 106, 106(A), 106(B),106(C), 106(D), 107, 107(A), 107(B), 108, 108(A), 108(B), 108(C), 109, 110,110(A), 110(B), 110(C), 111, 111(A), 111(B), 112, 112(A), 112(B), 112(C),112(D), 112(E), 113, 113(A), 113(B), 114, 114(A), 114(B), 114(C), 115,115(a), 115(b) and 236 and Title IV of the NIRC of 1997; and Republic ActNo. 9337 entitled "Amending Sections 27, 28, 34, 106, 107, 108, 109, 110,111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 and 288 of theNational Internal Revenue Code of 1997, as Amended, and for Other Purposes"(approved May 24, 2005).

See issuances on VAT on Refined Sugar Revenue Regulations No.6-2007 (dated March 21, 2007) Re: Consolidated Regulations on AdvanceValue Added Tax on the Sale of Refined Sugar, Amending and/or RevokingAll Revenue Issuances Issued to this Effect, and for Other Related Purposes;Revenue Regulations No. 11-2007 (dated August 15, 2007) Re: Suspension ofthe Implementation of Revenue Regulations No. 6-2007; RevenueRegulations No. 13-2008 (dated September 19, 2008) Re: ConsolidatedRegulations on Advance Value Added Tax on the Sale of Refined Sugar;Amending and/or Revoking All Revenue Issuances Issued to this Effect, andfor Other Related; Revenue Regulations No. 13-2013 (dated September 20,2013) Re: Amending Section 2 (b) of Revenue Regulations No. 13-08,


Relative to the Definition of Raw Sugar for Value Added Tax Purposes; andRevenue Memorandum Circular No. 59-2007 (dated September 12, 2007)Re: Clarifying the Effect of Suspension of Revenue Regulations No. 6-2007Otherwise Known as the "Consolidated Regulations on Advance Value AddedTax on the Sale of Refined Sugar, Amending and/or Revoking All RevenueIssuances Issued to this Effect and for Other Related Purposes".

See issuances on VAT on Tollway Operators Revenue MemorandumCircular No. 40-2005 (dated July 13, 2005) Re: Prescribing the StandardFormat of Invoice Structure for Tollway Industry; Revenue MemorandumCircular No. 52-2005 (dated September 28, 2005) Re: Value Added Tax(VAT) Liability of the Tollway Industry; Revenue Memorandum CircularNo. 72-2009 (dated December 21, 2009) Re: Value Added Tax (VAT) Liabilityof the Tollway Operators; Revenue Memorandum Circular 30-2010 (datedMarch 26, 2010) Re: Value-Added Tax on Toll Fees Paid by Private MotorVehicles; Revenue Memorandum Circular No. 63-2010 (dated July 19,2010) Re: Value-Added Tax on Tollway Operators; Revenue MemorandumCircular No. 34-2011 (dated August 15, 2011) Re: Circularization of theRelevant Excerpts from the En Banc Supreme Court Decision in G.R. No.193007, on the Imposition of Value Added Tax on Toll Fees; RevenueMemorandum Circular No. 39-2011 (dated August 31, 2011) Re:Value-Added Tax on Tollway Operators; and Revenue MemorandumCircular No. 54-2011 (dated November 4, 2011) Re: Circularization of the EnBanc Resolution of the Supreme Court Dated August 23, 2011 Denying withFinality the Motion for Reconsideration on G.R. No. 193007 (Petition forDeclaratory Relief on Constitutionality of Imposition of VAT on Toll Feeswith the Prayer for a Protective Cover for Road Users and Consumers, RenatoV. Diaz and Aurora Ma. F. Timbol vs. The Secretary of Finance, et al.).

See issuances on VAT on Power Industry Revenue MemorandumCircular No. 61-2005 (dated October 27, 2005) Re: Clarifying the VATProvisions of R.A. 9337 Applicable to the Power Industry; RevenueMemorandum Circular No. 11-2012 (dated March 22, 2012) Re: TaxConsequences of Power Sector Assets and Liabilities Management Corporation(PSALM) Transactions; Revenue Memorandum Circular No. 62-2012(dated October 25, 2012) Re: Clarifying the Reporting of Gross ReceiptsRelative to Power Generation and Distribution; Revenue MemorandumCircular No. 71-2012 (dated November 15, 2012) Re: Clarification on the


Implementation of RMC No. 62-2012 Dated October 25, 2012; and RevenueMemorandum Circular No. 66-2013 (dated September 30, 2013) Re:Circularizing Revocation of BIR Ruling No. 011-07.

See issuances on VAT on Electric Cooperatives - RevenueMemorandum Circular No. 72-2003 (dated October 20, 2003) Re: Taximplications of Electric Cooperatives registered with the NationalElectrification Administration and Cooperative Development Authority; andRevenue Memorandum Circular No. 74-2013 (dated November 26, 2013)Re: Circularizing the Tax Implications of Electric Cooperatives (EC)Registered with the National Electrification Administration (NEA) Pursuant toBIR Ruling No. 398-2013 Dated November 4, 2013.

See other related issuances - Revenue Regulations No. 14-2007 (datedDecember 11, 2007) Re: Tax on Non-governmental Organizations (NGOs) andCooperatives Engaged in Microfinance Activities; Revenue Regulations No.6-2008 (dated April 22, 2008) Re: Consolidated Regulations Prescribing TheRules on the Taxation of Sale, Barter, Exchange or Other Disposition of Sharesof Stock Held as Capital Assets; Revenue Regulations No. 3-2012 (datedFebruary 20, 2012) Re: Effectivity of Threshold Amounts for Sale ofResidential Lot, Sale of House and Lot, Lease of Residential Unit and Sale orLease of Goods or Properties or Performance of Services Covered by Section109 (P), (Q) and (V) of the Tax Code of 1997, as amended; RevenueRegulations No. 9-2012 (dated May 31, 2012) Re: Implementing Sections24(D)(1), 27(D)(5), 57, 106 and 196 of the National Internal Revenue Code of1997 on Non-Redemption of Properties Sold During Involuntary Sales;Revenue Memorandum Circular No. 29-2005 (dated June 29, 2005) Re:Clarifying the Provisions of Republic Act No. 9337 (VAT Law of 2005)Applicable to the Petroleum Industry; Revenue Memorandum Circular No.30-2005 (dated July 2, 2005) Re: Deferment of Revenue Regulations 14-2005;Revenue Memorandum Circular No. 57-2005 (dated October 18, 2005) Re:Attachments to the Quarterly VAT Return to be Filed Starting October 25,2005; Revenue Memorandum Circular No. 62-2005 (dated October 18,2005) Re: Revised Guidelines in the Registration & Invoicing RequirementsIncluding Clarification on Common Issues Affecting Value Added Tax (VAT)Taxpayers Pursuant to RA 9337 (An Act Amending Sections 27, 28, 34, 106,108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 and288 of the National Internal Revenue Code of 1997, as Amended, and for otherPurposes); Revenue Memorandum Circular No. 68-2005 (dated December 1,


2005) Re: Enhanced VAT Forms BIR Form No. 2550M (Monthly ValueAdded Tax Declaration) and BIR Form No. 2550Q (Quarterly Value AddedTax Return) September 2005 Version; Revenue Memorandum CircularNo. 72-2005 (dated December 16, 2005) Re: Transition Procedures for AllEFPS Filers (Large Taxpayers/Top 10,000 Corporations) in Filing Tax ReturnsAffected by the New VAT Law (R.A. 9337); Revenue MemorandumCircular No. 5-2006 (dated November 2, 2005) Re: Prescribing the use of theGovernment Money Payment Chart Implementing Sections 2.57.2, 4.114 and5.116 of Revenue Regulations No. 2-98 as amended by Revenue RegulationsNo. 16-2005 in relation to Sections 57(B), 114(C) and 116 to 123 of RepublicAct No. 8424 as amended by Republic Act No. 9337; Revenue MemorandumCircular No. 6-2006 (dated January 3, 2006) Re: Clarification to RevenueRegulations No. 14-2005, as last amended by Revenue Regulations No.16-2005, implementing Republic Act No. 9337; Revenue MemorandumCircular No. 7-2006 (dated January 31, 2006) Re: Publishing the Full text ofthe Memorandum from Executive Secretary Eduardo R. Ermita dated January31, 2006 Approving the Recommendation of the Secretary of Finance toIncrease the Value Added Tax Rate from Ten Percent to Twelve Percent;Revenue Memorandum Circular No. 8-2006 (dated January 31, 2006) Re:Clarifying Certain Issues Relating to the Implementation of the Increase in theVAT Rate from 10% to 12% pursuant to Republic Act No. 9337; RevenueMemorandum Circular No. 9-2006 (dated January 25, 2006) Re: Clarifyingthe Amount Subject to VAT and Expanded Withholding Tax (Income Tax) ofBrokers and Others Similarly Situated and the Other Parties with Whom TheyTransact Business; Revenue Memorandum Circular No. 17-2006 (datedFebruary 21, 2006) Re: Clarifying Certain Provision of Revenue RegulationsNo. 16-2005, Particularly on the 70% Cap or Limitation on the DeductibleInput Tax for VAT Purposes; Revenue Memorandum Circular No. 21-2006(dated May 24, 2006) Re: Clarification of Issues on How to Fill-up the NewVersion of VAT Forms (September, 2005 Version) and Other Related Issues;Revenue Memorandum Circular No. 22-2006 (dated April 5, 2006) Re:Clarifying Certain Issues Relating to the Implementation of the Increase in theVAT Rate from 10% to 12% on the Sale of Goods Pursuant to the RepublicAct No. 9337; Revenue Memorandum Circular No. 31-2006 (dated May 29,2006) Re: Value Added Tax on the Construction or Renovation of OfficialBuildings or Properties of the United States of America Embassy; RevenueMemorandum Circular No. 35-2006 (dated June 21, 2006) Re: Clarifying theproper VAT and EWT treatment of freight and other incidental charges billed


by Freight Forwarders; Revenue Memorandum Circular No. 55-2006 (datedJuly 20, 2006) Re: Availability of BIR Forms 2550M/2550Q and 1702/1702Qin Electronic Filing and Payment System (eFPS); Revenue MemorandumCircular No. 13-2007 (dated February 5, 2007) Re: Clarifications on theTreatment of Reimbursable Expenses Made by Personnel/Officials of theGovernment or Any of its Instrumentalities including Government Owned orControlled Corporations in connection with RA 9337, As Amended; RevenueMemorandum Circular No. 23-2007 (dated March 22, 2007) Re: Clarifies thecomputations of Withholding Taxes and other requirements on GovernmentMoney Payments due or payable to suppliers of goods and/or services, inconnection with the implementation of Republic Act No. 9337, as amended,and other related law and regulations; Revenue Memorandum Circular No.40-2007 (effective June 14, 2007) Re: Tax Treatment on the DevelopmentAssistance Activities of the United States Agency for InternationalDevelopment (USAID) in the Philippines; Revenue Memorandum CircularNo. 39-2007 (dated January 22, 2007) Re: Clarifying the Income Tax and VATTreatment of Agency Fees/Gross Receipts of Security Agencies Including theWithholding of Taxes Due thereon; Revenue Memorandum Circular No.50-2007 (dated July 30, 2007) Re: Tax Treatment of Sale, Barter or Exchangeof Goods or Properties or Sale or Exchange of Services Made by Suppliersfrom the Customs Territory to Registered Freeport Zone Enterprises in theSubic Freeport Zone (SFZ), the Clark Freeport Zone (CFZ), as well as thePoro Point Freeport Zone (PPFZ), and Vice Versa under Sections 12 and 15 ofRepublic Act No. 7227, as amended by Republic Act No. 9400; RevenueMemorandum Circular No. 31-2008 (dated January 30, 2008) Re:Clarification of Issues Concerning Common Carriers by Sea and their AgentsRelative to the Transport of Passengers, Goods or Cargoes; RevenueMemorandum Circular No. 30-2008 (dated April 1, 2008) Re: Clarifying theTaxability of Insurance Companies for MCIT, Business Tax, and DocumentaryStamp Tax Purposes, as subsequently amended by Revenue MemorandumCircular No. 59-2008 (dated August 23, 2008) Re: Amending Certain Portionsof Revenue Memorandum Circular No. 30-2008 on the Subject of theTaxability of Insurance Companies for Minimum Corporate Income Tax(MCIT), Business Tax and Documentary Stamp Tax Purposes; RevenueMemorandum Circular No. 46-2008 (dated February 1, 2008) Re: ProvidesBasic Question And Answers To Clarify Issues Concerning Common CarriersBy Air And Their Agents Relative To The Revenue And Receipt FromTransport Of Passengers, Goods/Cargoes And Mail And From Excess


Baggage; Revenue Memorandum Circular No. 56-2008 (dated July 25,2008) Re: Procedure on the Handling of Taxpayer's Application forCancellation of Business Registration, and Warning on the Use of OfficialReceipts/Sales Invoices of Dissolved Businesses for Purposes of ClaimingInput Taxes; Revenue Memorandum Circular No. 76-2008 (dated November21, 2008) Re: Construction Agent for the Construction or Renovation ofOfficial Buildings or Properties of the United States of America Embassy andAmendments to Revenue Memorandum; Revenue Memorandum CircularNo. 6-2009 (dated January 27, 2009) Re: Circularizing Revocation of all OtherBIR Rulings Similar to BIR Ruling No. DA (VAT-054) 529-2008 andClarifying the VATability of HMOs; Revenue Memorandum Circular No.30-2009 (dated May 14, 2009) Re: Circularizing Relevant Portions of HUDCCResolution No. 1, Series of 2008, Approving the Adjustment of the PriceCeiling for Socialized Housing; Revenue Memorandum Circular No.51-2009 (dated September 15, 2009) Re: Clarification on the Requirement forthe Submission of Summary Lists of Sales (SLS)/Summary Lists of Purchases(SLP); the Imposition of Penalties for their Non-Submission; the Issuance ofSubpoena Duces Tecum; and the Imposition of Penalties for Failure to ObeySummons, Pursuant to Revenue Regulations No. 8-2002, as Incorporated inRevenue Regulations No. 16-2005, and Revenue Memorandum Order No.12-2009; Revenue Memorandum Circular No. 12-2010 (dated February 11,2010) Re: Circularizing the Full Text of Joint Rules and RegulationsImplementing Articles 60, 61 and 144 of Republic Act No. 9520, OtherwiseKnown as the "Philippine Cooperative Code of 2008" in Relation to RA No.8424 or the National Internal Revenue Code, as Amended; RevenueMemorandum Circular No. 18-2010 (dated March 1, 2010) Re: Clarificationon the Coverage and Taxability of Amusement Places under Section 125 (b) ofthe National Internal Revenue Code (Tax Code) of 1997, as Amended;Revenue Memorandum Circular No. 60-2010 (dated July 13, 2010) Re:Clarification on the Coverage of RMO 56-2010 (Use of Updated Medium forSubmitting the Summary List of Sales and Purchases [SLSP]); RevenueMemorandum Circular No. 97-2010 (dated December 10, 2010) Re: VATExemption of Services by Agricultural Contract Growers; RevenueMemorandum Circular No. 31-2011 (dated August 4, 2011) Re: Revocationof BIR Ruling [DA-(VAT-057) 552-08] Dated December 18, 2008 pursuant toBIR Ruling 099-2011 dated April 6, 2011; Revenue Memorandum CircularNo. 49-2011 (dated October 3, 2011) Re: Further Clarification on RMC No.38-2011 on Expanded Withholding Tax Obligation of Philippine Health


Insurance Corporation (PHIC) Including the Income Tax WithholdingObligation of Hospitals/Clinics on Case Rates of PHIC and the Matter of 5%Final Withholding VAT for Government Money Payments; RevenueMemorandum Circular No. 8-2012 (dated February 29, 2012) Re:Circularization of the Relevant Excerpts from the En Banc Supreme CourtDecision in the Case of Philippine Amusement and Gaming Corporation(PAGCOR) vs. The Bureau of Internal Revenue, Represented Herein by Hon.Jose Mario Buag, in His Official Capacity as Commissioner of InternalRevenue, Public Respondent, JOHN DOE and JANE DOE, Who are PersonsActing for, in Behalf, or Under the Authority of Respondent, Public andPrivate Respondents, G.R. No. 172087 Dated March 15, 2011, on ExcludingPAGCOR from Exemption from Corporate Income Tax and the Declaration ofNullity of the Pertinent Provisions of Revenue Regulations No. 16-2005Relative to the Imposition of 10% VAT on PAGCOR; and Subsequently, theEn Banc Court Resolution Dated May 31, 2011 Denying with Finality theRelevant Motions for Partial Reconsideration Thereto; RevenueMemorandum Circular No. 38-2012 (dated August 3, 2012) Re: Questionsand Answers Further Clarifying the Provisions of Revenue Regulations (RR)No. 7-2010, as amended by RR No. 8-2010, Implementing the Tax PrivilegesProvisions of Republic Act (RA) No. 9994, Otherwise Known as the"Expanded Senior Citizens Act of 2010"; Revenue Memorandum CircularNo. 63-2012 (dated October 29, 2012) Re: Clarifying the Issues AffectingInvoicing and Recording of Income Payments for Media AdvertisingPlacements; Revenue Memorandum Circular No. 64-2012 (dated October31, 2012) Re: Business Taxes on Professionals; Revenue MemorandumCircular No. 65-2012 (No date supplied 2012) Re: Clarifying the Taxabilityof Association Dues, Membership Fees, and Other Assessments/ChargesCollected by Condominium Corporations; Revenue Memorandum CircularNo. 75-2012 (dated November 22, 2012) Re: Clarifying Section 109 (1) (R) ofthe National Internal Revenue Code of 1997, as Amended, on the VATExemption of the Sale, Importation, Printing or Publication of Books,Newspapers, Magazines, Reviews or Bulletins; Revenue MemorandumCircular No. 91-2012 (dated December 28, 2012) Re: Supplement to RevenueMemorandum Circular No. 63-2012 on Invoicing and Recording of IncomePayments for Media Advertising Placements; Revenue MemorandumCircular No. 3-2014 (dated January 6, 2014) Re: Circularizing Modification ofBIR Ruling DA (C-133) 431-2008; Revenue Memorandum Circular No.35-2014 (dated May 8, 2014) Re: Circularizing Relevant Portions of Housing


and Urban Development Coordinating Council (HUDCC) Resolution No. 1,Series of 2013, Approving the Adjustment of the Price Ceiling for SocializedHousing; Revenue Memorandum Order No. 7-2006 (dated December 15,2005) Re: Prescribing Guidelines and Procedures in the Processing ofApplications for Zero-Rating of Effectively Zero-Rated Transactions forValue-Added Tax Purposes; Revenue Memorandum Order No. 22-2008(dated June 5, 2008) Re: Prescribing the Guidelines for Short-Audit of the 1stQuarter Value-Added Tax for Taxable Year 2008 of Taxpayers Under theJurisdiction of the Large Taxpayers Service and the Regional Offices; RevenueMemorandum Order No. 3-2009 (dated January 15, 2009) Re: Amendmentand Consolidation of the Guidelines in the Conduct of Surveillance andStock-Taking Activities, and the Implementation of the AdministrativeSanction of Suspension and Temporary Closure of Business; RevenueMemorandum Order No. 16-2010 (dated February 5, 2010) Re:Determination of Value Added Tax Liabilities of Motels and Other SimilarEstablishments; and Revenue Memorandum Order No. 56-2010 (dated June16, 2010) Re: Use of Updated Medium for Submitting the Summary List ofSales and Purchases (SLSP).

First Paragraph

1 Authority of Secretary of Finance to Promulgate Rules and Regulations; andSpecific Provisions to be Contained in Rules and Regulations.

2 Entitled "An Act Amending Sections 27, 28, 34, 106, 107, 108, 109, 110, 111,112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 and 288 of the NationalInternal Revenue Code of 1997, as Amended, and For Other Purposes"(approved May 24, 2005).

3 Re: Consolidated Value-Added Tax Regulations of 2005.

Section 4.106-1 - VAT on Sale of Goods or Properties

4 As amended by Section 2 of Revenue Regulations No. 4-2007.

Original text

SECTION 4.106-1. VAT on Sale of Goods or Properties. VAT isimposed and collected on every sale, barter or exchange, or transactions"deemed sale" of taxable goods or properties at the rate of [10%] of the grossselling price or gross value in money of the goods or properties sold, bartered, orexchanged, or deemed sold in the Philippines.


Section 4.106-3 - Sale of Real Properties


Original text

SECTION 4.106-3. "Sale of Real Properties". Sale of real propertiesheld primarily for sale to customers or held for lease in the ordinary course oftrade or business of the seller shall be subject to VAT.

[In the case of sale of real properties on the installment plan, the realestate dealer shall be subject to VAT on the installment payments, includinginterest and penalties, actually and/or constructively received by the seller.]

Sale of residential lot exceeding P1,500,000.00, residential house and lotor other residential dwellings exceeding P2,500,000.00, where the instrument ofsale (whether the instrument is nominated as a deed of absolute sale, deed ofconditional sale or otherwise) is executed on or after [July 1, 2005], shall besubject to 10% VAT.

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As amended by Revenue Regulations No. 4-2007, Sec. 3 to read as follows:

SEC. 4.106-3. Sale of Real Properties. Sale of real properties heldprimarily for sale to customers or held for lease in the ordinary course of tradeor business of the seller shall be subject to VAT.

Sale of residential lot with gross selling price exceeding[P1,500,000.00], residential house and lot or other residential dwellings withgross selling price exceeding [P2,500,000.00], where the instrument of sale(whether the instrument is nominated as a deed of absolute sale, deed ofconditional sale or otherwise) is executed on or after Nov. 1, 2005, shall besubject to ten percent (10%) output VAT, and starting Feb. 1, 2006, to twelvepercent (12%) output VAT.

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As amended by Revenue Regulations No. 16-2011, Sec. 2 to read as follows:

Section 4.106-3. Sale of Real Properties. Sale of real properties heldprimarily for sale to customers or held for lease in the ordinary course of tradeor business of the seller shall be subject to VAT.


Sale of residential lot with gross selling price exceeding P1,919,500.00,residential house and lot or other residential dwellings with gross selling priceexceeding P3,199,200.00, where the instrument of sale (whether the instrumentis nominated as a deed of absolute sale, deed of conditional sale or otherwise) isexecuted on or after Nov. 1, 2005, shall be subject to ten percent (10%) outputVAT, and starting Feb. 1, 2006, to twelve percent (12%) output VAT.

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6 As added by Section 2 of Revenue Regulations No. 3-2012.

7 As amended by Section 3, Revenue Regulations No. 4-2007.

Original text

Section 4.106-3. Sale of Real Properties. . . .

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Installment sale of residential house and lot or other residentialdwellings exceeding P1,000,000.00, where the instrument of sale (whether theinstrument is nominated as a deed of absolute sale, deed of conditional sale orotherwise) was executed prior to [July 1, 2005], shall be subject to 10% VAT.

["]Sale of real property on installment plan["] means sale of real propertyby a real estate dealer, the initial payments of which in the year of sale do notexceed twenty-five percent (25%) of the gross selling price.

[However, in the case of sale of real properties on the deferred-paymentbasis, not on the installment plan, the transaction shall be treated as cash salewhich makes the entire selling price taxable in month of sale.]

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8 As added by Section 3, Revenue Regulations No. 4-2007.







Section 4.106-4 - Meaning of the Term "Gross Selling Price"


Original text

SECTION 4.106-4. Meaning of the Term "Gross Selling Price". Theterm "gross selling price" means the total amount of money or its equivalentwhich the purchaser pays or is obligated to pay to the seller in consideration ofthe sale, barter or exchange of the goods or properties, excluding VAT. Theexcise tax, if any, on such goods or properties shall form part of the gross sellingprice.

In the case of sale, barter or exchange of real property subject to VAT,gross selling price shall mean the consideration stated in the sales document orthe fair market value whichever is higher. The term "fair market value" shallmean whichever is the higher of: 1) the fair market value as determined by theCommissioner [(]zonal value[)], or 2) the fair market value as shown inschedule of values of the Provincial and City Assessors (real property taxdeclaration). However, in the absence of zonal value, gross selling price refersto the market value shown in the latest real property tax declaration or theconsideration, whichever is higher. If the gross selling price is based on thezonal value or market value of the property, the zonal or market value shall bedeemed [inclusive] of VAT. [If the VAT is not billed separately, the sellingprice stated in the sales document shall be deemed to be inclusive of VAT].



Section 4.106-5(a)(6) - Zero-Rated Sales of Goods or Properties


Original text:

SECTION 4.106-5. Zero-Rated Sales of Goods or Properties. . . .

The following sales by VAT-registered persons shall be subject to zeropercent (0%) rate:

(a) Export sales. "Export Sales" shall mean: . . .


(5) Transactions considered export sales under Executive Order No.226, otherwise known as the Omnibus Investments Code of 1987, and otherspecial laws.

"Considered export sales under Executive Order No. 226" shall meanthe Philippine port F.O.B. value determined from invoices, bills of lading,inward letters of credit, landing certificates, and other commercial documents,of export products exported directly by a registered export producer, or the netselling price of export products sold by a registered export producer to anotherexport producer, or to an export trader that subsequently exports the same;Provided, That sales of export products to another producer or to an exporttrader shall only be deemed export sales when actually exported by the latter, asevidenced by landing certificates or similar commercial documents; Provided,further, That without actual exportation the following shall be consideredconstructively exported for purposes of these provisions: (1) sales to bondedmanufacturing warehouses of export-oriented manufacturers; (2) sales to exportprocessing zones; (3) sales to registered export traders operating bonded tradingwarehouses supplying raw materials in the manufacture of export productsunder guidelines to be set by the Board in consultation with the Bureau ofInternal Revenue (BIR) and the Bureau of Customs (BOC); (4) sales todiplomatic missions and other agencies and/or instrumentalities granted taximmunities, of locally manufactured, assembled or repacked products whetherpaid for in foreign currency or not.

For purposes of zero-rating, the export sales of registered export tradersshall include commission income. The exportation of goods on consignmentshall not be deemed export sales until the export products consigned are in factsold by the consignee; and Provided, finally, that sales of goods, properties orservices made by a VAT-registered supplier to a BOI-registeredmanufacturer/producer whose products are 100% exported are considered exportsales. A certification to this effect must be issued by the Board of Investment(BOI) which shall be good for one year unless subsequently re-issued by theBOI.

(6) The sale of goods, supplies, equipment and fuel to persons engagedin international shipping or international air transport operations; Provided, Thatthe same is limited to goods, supplies, equipment and fuel pertaining to orattributable to the transport of goods and passengers from a port in thePhilippines directly to a foreign port without docking or stopping at any otherport in the Philippines; Provided, further, that if any portion of such fuel, goodsor supplies is used for purposes other than that mentioned in this paragraph,such portion of fuel, goods and supplies shall be subject to 10% VAT.


Section 4.106-6 - Meaning of the Term "Effectively Zero-rated Sale of Goods andProperties"


Original text:

SECTION 4.106-6. Meaning of the Term "Effectively Zero-rated Sale ofGoods and Properties". The term "effectively zero-rated sale of goods andproperties" shall refer to the local sale of goods and properties by aVAT-registered person to a person or entity who was granted indirect taxexemption under special laws or international agreement. [Under theseRegulations, transactions which, although not involving actual export, areconsidered as "constructive export" shall be entitled to the benefit of zero-rating,such as local sales of goods and properties to persons or entities covered underpars. (a) no. (3) (sale to export-oriented enterprises), (a) no. (6) (sale ofgoods, supplies, equipment and fuel to persons engaged in internationalshipping or international air transport operations), (b) (Foreign CurrencyDenominated Sale) and (c) (Sales to Tax-Exempt Persons or Entities) of thepreceding section.

Except for Export Sale under Sec. 4.106-5(a) and Foreign CurrencyDenominated Sale under Sec. 4.106-5(b), other cases of zero-rated sales shallrequire prior application with the appropriate BIR office for effectivezero-rating. Without an approved application for effective zero-rating, thetransaction otherwise entitled to zero-rating shall be considered exempt. Theforegoing rule notwithstanding, the Commissioner may prescribe such rules toeffectively implement the processing of applications for effective zero-rating.]

Section 4.106-7(b) - Transactions Deemed Sale


Original text

SECTION 4.106-7. Transactions Deemed Sale. . . .

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(b) The Commissioner of Internal Revenue shall determine theappropriate tax base in cases where a transaction is deemed a sale, barter orexchange of goods or properties under Sec. 4.106-7 paragraph (a) hereof, orwhere the gross selling price is unreasonably lower than the actual market value.The gross selling price is unreasonably lower than the actual market value if it is


lower by more than 30% of the actual market value of the same goods of thesame quantity and quality sold in the immediate locality on or nearest the date ofsale.

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Section 4.106-8(b)(1) - Change or Cessation of Status as VAT-registered Person


Original text

SECTION 4.106-8. Change or Cessation of Status as VAT-registeredPerson. . . .

(b) Not subject to output tax

The VAT shall not apply to goods or properties existing as of theoccurrence of the following:

(1) Change of control of a corporation by the acquisition of thecontrolling interest of such corporation by another stockholder or group ofstockholders. The goods or properties used in business or those comprising thestock-in-trade of the corporation, having a change in corporate control, will notbe considered sold, bartered or exchanged despite the change in the ownershipinterest in the said corporation.

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22 As amended Section 2, Revenue Regulations No. 10-2011.

Original text


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Illustration: Abel Corporation is a merchandising concern and has aninventory of goods for sale amounting to Php1 million. Nel Corporation, a realestate developer, exchanged its real estate properties for the shares of stocks ofAbel Corporation resulting to the acquisition of corporate control. The inventoryof goods owned by Abel Corporation (Php1 million worth) is not subject to


output tax despite the change in corporate control because the same corporationstill owns them. This is in recognition of the separate and distinct personality ofthe corporation from its stockholders. However, the exchange of real estateproperties held for sale or for lease, for shares of stocks, whether resulting tocorporate control or not, is subject to VAT[. This is an actual exchange ofproperties which makes the transaction taxable].

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Text as amended by Section 8 of Revenue Regulations No. 4-2007 to read asfollow:


xxx xxx xxx

Illustration: Abel Corporation is a merchandising concern and has aninventory of goods for sale amounting to Php1 million. Nel Corporation, a realestate developer, exchanged its real estate properties for the shares of stocks ofAbel Corporation resulting to the acquisition of corporate control. The inventoryof goods owned by Abel Corporation (Php 1 million worth) is not subject tooutput tax despite the change in corporate control because the same corporationstill owns them. This is in recognition of the separate and distinct personality ofthe corporation from its stockholders. However, the exchange of real [estate]properties held for sale or for lease, [for shares of stocks], whether resulting tocorporate control or not, is subject to VAT[, subject to exceptions providedunder Section 4.106-3 hereof. On the other hand, if the transferee of thetransferred real property by a real estate dealer is another real estatedealer, in an exchange where the transferor gains control of thetransferee-corporation, no output VAT is imposable on the said transfer].

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Section 4.108-1 - VAT on the Sale of Services and Use or Lease of Properties


Original text

SECTION 4.108-1. VAT on the Sale of Services and Use or Lease ofProperties. Sale or exchange of services, as well as the use or lease ofproperties, as defined in Sec. 108 (A) of the Tax Code shall be subject to VAT,


equivalent to [10%] of the gross receipts (excluding VAT).

Section 4.108-3(k) - Definitions and Specific Rules on Selected Services


Original text

SECTION 4.108-3. Definitions and Specific Rules on Selected Services.

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(e) Domestic common carriers by air and sea are subject to [10%]VAT on their gross receipts from their transport of passengers, goods or cargoesfrom one place in the Philippines to another place in the Philippines.

(f) Sale of electricity by generation, transmission, and distributioncompanies shall be subject to [10%] VAT on their gross receipts; Provided,That sale of power or fuel generated through renewable sources of energy suchas, but not limited to, biomass, solar, wind, hydropower, geothermal, oceanenergy, and other emerging energy sources using technologies such as fuel cellsand hydrogen fuels shall be subject to 0% VAT.

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(h) Services of franchise grantees . . .

Gross receipts of all other franchisees, other than those covered by Sec.119 of the Tax Code, regardless of how their franchises may have been granted,shall be subject to the [10%] VAT imposed under Sec. 108 of the Tax Code.This includes among others, the Philippine and Amusement GamingCorporation (PAGCOR), and its licensees or franchisees.

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(i) Non-life insurance companies including surety, fidelity, indemnityand bonding companies are subject to VAT. They are not liable to the paymentof the premium tax under Sec. 123 of the Tax Code.

"Non-life insurance companies" including surety, fidelity, indemnity andbonding companies, shall include all individuals, partnerships, associations, orcorporations, including professional reinsurers defined in Sec. 280 of PD 612,otherwise known as The Insurance Code of the Philippines, mutual benefitassociations and government-owned or controlled corporations, engaging in the


business of property insurance, as distinguished from insurance on human lives,health, accident and insurance appertaining thereto or connected therewithwhich shall be subject to the percentage tax under Sec. 123 of the Tax Code.

The gross receipts from non-life insurance shall mean total premiumscollected, whether paid in money, notes, credits or any substitute for money.

Non-life [reinsurance] premiums are subject to VAT. Insurance andreinsurance commissions, whether life or non-life, are subject to VAT.

[VAT due from the foreign reinsurance company is to be withheld by thelocal insurance company and to be remitted to the BIR in accordance with Sec.4.114-2(b)(2) hereof by filing the Monthly Remittance Return of Value-AddedTax Withheld (BIR Form 1600).]

(j) Pre-need Companies . . .

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Section 4.108-4 - Definition of Gross Receipts


Original text

SECTION 4.108-4. Definition of Gross Receipts. "Gross receipts"refers to the total amount of money or its equivalent representing the contractprice, compensation, service fee, rental or royalty, including the amount chargedfor materials supplied with the services and deposits applied as payments forservices rendered and advance payments actually or constructively receivedduring the taxable period for the services performed or to be performed foranother person, excluding VAT.

"Constructive receipt" occurs when the money consideration or itsequivalent is placed at the control of the person who rendered the servicewithout restrictions by the payor. The following are examples of constructivereceipts:

(1) deposit in banks which are made available to the seller ofservices without restrictions;

(2) issuance by the debtor of a notice to offset any debt orobligation and acceptance thereof by the seller aspayment for services rendered; and


(3) transfer of the amounts retained by the payor to theaccount of the contractor.

Section 4.108-5(4) - Zero-Rated Sale of Services


Original text

SECTION 4.108-5. Zero-Rated Sale of Services.

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(b) Transactions Subject to Zero Percent (0%) VAT Rate. . . .

(4) Services rendered to persons engaged in international shipping orair transport operations, including leases of property for use thereof; Provided,however, that the services referred to herein shall not pertain to those made tocommon carriers by air and sea relative to their transport of passengers, goods orcargoes from one place in the Philippines to another place in the Philippines, thesame being subject to [10%] VAT under Sec. 108 of the Tax Code;

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Section 4.108-6 - Meaning of the Term 'Effectively Zero-Rated Sale of Services'


Original text

SECTION 4.108-6. Effectively Zero-Rated Sale of Services. The term"effectively zero-rated sales of services" shall refer to the local sale of servicesby a VAT-registered person to a person or entity who was granted indirect taxexemption under special laws or international agreement. [Under theseRegulations, effectively zero-rated sale of services shall be limited to local salesto persons or entities that enjoy exemptions from indirect taxes undersubparagraph (b) nos. (3), (4) and (5) of this Section. The concerned taxpayermust seek prior approval or prior confirmation from the appropriate offices ofthe BIR so that a transaction is qualified for effective zero-rating. Without anapproved application for effective zero-rating, the transaction otherwise entitledto zero-rating shall be considered exempt. The foregoing rule notwithstanding,the Commissioner may prescribe such rules to effectively implement theprocessing of applications for effective zero-rating.]

Section 4.109-1 - VAT-Exempt Transactions



SECTION 4.109-1. VAT-Exempt Transactions. . . .

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(B) Exempt transactions.

(1) Subject to the provisions of [Subsection (2)] hereof, the followingtransactions shall be exempt from VAT:

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Original text


xxx xxx xxx

(B) Exempt transactions. . . .

(1) Subject to the provisions of Subsection (2) hereof, the followingtransactions shall be exempt from VAT:

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(e) Services subject to percentage tax under Title V of the Tax Code,as enumerated below:

(1) Sale or lease of goods or properties or the performance ofservices of non-VAT-registered persons, other than thetransactions mentioned in paragraphs (A) to (U) of Sec.109(1) of the Tax Code, the gross annual sales and/orreceipts of which does not exceed the amount of [OneMillion Five Hundred Thousand Pesos (P1,500,000.00);Provided, That not later than January 31, 2009 and everythree (3) years thereafter, the amount herein stated shallbe adjusted to its present value using the Consumer PriceIndex, as published by the National Statistics Office(NSO) (Sec. 116 of the Tax Code)];


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30 Reveneue Regulations No. 16-2005 was not amended to reflect the amendmentintroduced by Republic Act No. 10378 entitled "An Act Recognizing ThePrinciple Of Reciprocity As Basis For The Grant Of Income Tax ExemptionsTo International Carriers And Rationalizing Other Taxes Imposed Thereon ByAmending Sections 28 (A) (3) (A), 109, 118 And 236 Of The National InternalRevenue Code (NIRC), As Amended, And For Other Purposes" (approvedMarch 7, 2013), which amended Section 118 to subject internationalair/shipping carriers to percentage tax on only their gross receipts derived fromtransport of cargo from the Philippines to another country.

See further Revenue Regulations No. 15-2013 (dated September 20,2013) Re: Revenue Regulations Implementing Republic Act No. 10378Entitled "An Act Recognizing the Principle of Reciprocity as Basis for theGrant of Income Tax Exemptions to International Carriers and RationalizingOther Taxes Imposed Thereon by Amending Sections 28 (A) (3) (A), 109, 118and 236 of the National Internal Revenue Code (NIRC), as Amended, and forOther Purposes".

31 The complete rule in this regard is as provided under Section 8(b.2.1.2(i)) ofDepartment of Finance Joint Rules and Regulations Implementing Article60, 61 and 144 of Republic Act No. 9520, Otherwise Knows as the"Philippines Cooperative Code of 2008" in relation to RA No. 8424 or theNational Internal Revenue Code, As Amended (dated February 5, 2010).



34 As amended by Section 2, Revenue Regulations No. 16-2011 and Section 2,Revenue Regulations No. 3-2012.

Original text reads:



(1) Subject to the provisions of Subsection (2) hereof, the following


transactions shall be exempt from VAT:

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(p) The following sales of real properties are exempt fromVAT, namely:

(4) Sale of residential lot valued at One Million FiveHundred Thousand Pesos (P1,500,000.00) and below, orhouse & lot and other residential dwellings valued at TwoMillion Five Hundred Thousand Pesos (P2,500,000.00)and below where the instrument ofsale/transfer/disposition was executed on or after July 1,2005; Provided, That not later than January 31, 2009 andevery three (3) years thereafter, the amounts stated hereinshall be adjusted to its present value using the ConsumerPrice Index, as published by the National Statistics Office(NSO); Provided, further, that such adjustment shall bepublished through revenue regulations to be issued notlater than March 31 of each year;

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As amended by Section 2, Revenue Regulations No. 16-2011 to read asfollows:




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(p) The following sales of real properties are exempt from VAT,namely:

(4) Sale of residential lot valued at One Million Nine HundredNineteen Thousand Five Hundred Pesos (P1,919,500.00) and below, or house& lot and other residential dwellings valued at Three Million One HundredNinety-Nine Thousand Two Hundred Pesos (P3,199,200.00) and belowwhere the instrument of sale/transfer/disposition was executed on or after July 1,


2005; Provided, That every three (3) years thereafter, the amounts statedherein shall be adjusted to its present value using the Consumer PriceIndex, as published by the National Statistics Office (NSO); Provided,further, that such adjustment shall be published through revenue regulations tobe issued not later than March 31 of each year;

xxx xxx xxx


36 As amended by Section 2, Revenue Regulations No. 16-2011 and Section 2,Revenue Regulations No. 3-2012.

Original text reads:




xxx xxx xxx


xxx xxx xxx

(4) . . .

If two or more adjacent residential lots are sold or disposed in favor ofone buyer, for the purpose of utilizing the lots as one residential lot, the saleshall be exempt from VAT only if the aggregate value of the lots do not exceed[P1,500,000.00]. Adjacent residential lots, although covered by separate titlesand/or separate tax declarations, when sold or disposed to one and the samebuyer, whether covered by one or separate Deed of Conveyance, shall bepresumed as a sale of one residential lot.

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Text as amended by Section 2, Revenue Regulations No. 16-2011 to read asfollows:





xxx xxx xxx


xxx xxx xxx

(4) . . .

If two or more adjacent residential lots are sold or disposed in favor ofone buyer, for the purpose of utilizing the lots as one residential lot, the saleshall be exempt from VAT only if the aggregate value of the lots do not exceedP1,919,500.00. Adjacent residential lots, although covered by separate titlesand/or separate tax declarations, when sold or disposed to one and the samebuyer, whether covered by one or separate Deed of Conveyance, shall bepresumed as a sale of one residential lot.

xxx xxx xxx



Original text:




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(q) Lease of residential units with a monthly rental per unit notexceeding [Ten Thousand Pesos (P10,000.00)], regardless of the amount ofaggregate rentals received by the lessor during the year; [Provided, that not later


than January 31, 2009 and every three (3) years thereafter, the amount ofP10,000.00 shall be adjusted to its present value using the Consumer PriceIndex, as published by the NSO];

The foregoing notwithstanding, lease of residential units where themonthly rental per unit exceeds [Ten Thousand Pesos (P10,000.00)] but theaggregate of such rentals of the lessor during the year do not exceed [OneMillion Five Hundred Pesos (P1,500,000.00)] shall likewise be exempt fromVAT, however, the same shall be subjected to three percent (3%) percentagetax.

In cases where a lessor has several residential units for lease, some areleased out for a monthly rental per unit of not exceeding P10,000.00 whileothers are leased out for more than [P10,000.00] per unit, his tax liability will beas follows:

1. The gross receipts from rentals not exceeding[P10,000.00] per month per unit shall be exempt fromVAT regardless of the aggregate annual gross receipts.

2. The gross receipts from rentals exceeding [P10,000.00]per month per unit shall be subject to VAT if theaggregate annual gross receipts from said units only (notincluding the gross receipts from units leased for notmore than [P10,000.00]) exceeds [P1,500,000.00].Otherwise, the gross receipts will be subject to the 3% taximposed under Section 116 of the Tax Code.

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Original text:




xxx xxx xxx


(q) . . .

The term 'residential units' shall refer to apartments and houses & lotsused for residential purposes, and buildings or parts or units thereof used solelyas dwelling places (e.g., dormitories, rooms and bed spaces) except motels,motel rooms, hotels [and] hotel rooms.

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40 To reflect the insertion made to the enumeration under Section 109 of the TaxCode by Republic Act No. 10378 entitled "An Act Recognizing the Principleof Reciprocity as Basis for the Grant of Income Tax Exemptions toInternational Carriers and Rationalizing Other Taxes Imposed Thereon byAmending Sections 28 (A) (3) (A), 109, 118 and 236 of the National InternalRevenue Code (NIRC), as Amended, and for Other Purposes" (approvedMarch 7, 2013); succeeding paragraphs were renumbered accordingly.



Original text:




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[(t)] Importation of fuel, goods and supplies by persons engaged ininternational shipping or air transport operations; Provided, that the said fuel,goods and supplies shall be used exclusively or shall pertain to the transport ofgoods and/or passenger from a port in the Philippines directly to a foreign port[without stopping at any other port in the Philippines]; Provided, further, that ifany portion of such fuel, goods or supplies is used for purposes other than thatmentioned in this paragraph, such portion of fuel, goods and supplies shall besubject to [10% VAT];

[(u)] Services of banks, non-bank financial intermediaries performingquasi-banking functions, and other non-bank financial intermediaries subject to


percentage tax under Secs. 121 and 122 of the Tax Code[, such as moneychangers and pawnshops]; and

[(v)] Sale or lease of goods or properties or the performance of servicesother than the transactions mentioned in the preceding paragraphs, the grossannual sales and/or receipts do not exceed the amount of One Million FiveHundred Thousand Pesos (P1,500,000.00); Provided, That not later than January31, 2009 and every three (3) years thereafter, the amount of P1,500,000.00 shallbe adjusted to its present value using the Consumer Price Index, as published bythe NSO.

Note that paragraph (v) was replaced also by Sec. 14 of RevenueRegulations No. 4-2007 which was later amended by Sec. 2 of RevenueRegulations No. 16-2011.


Original text:




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[(v)] Sale or lease of goods or properties or the performance of servicesother than the transactions mentioned in the preceding paragraphs, the grossannual sales and/or receipts do not exceed the amount of [One Million FiveHundred Thousand Pesos (P1,500,000.00); Provided, That not later than January31, 2009 and every three (3) years thereafter, the amount of P1,500,000.00 shallbe adjusted to its present value using the Consumer Price Index, as published bythe NSO.]

For purposes of the threshold of [P1,500,000.00], the husband and thewife shall be considered separate taxpayers. However, the aggregation rule foreach taxpayer shall apply. For instance, if a professional, aside from the practiceof his profession, also derives revenue from other lines of business which areotherwise subject to VAT, the same shall be combined for purposes ofdetermining whether the threshold has been exceeded. Thus, the VAT-exemptsales shall not be included in determining the threshold.


Note that paragraph (v) was replaced by Sec. 14 of Revenue RegulationsNo. 4-2007.

Section 4.109-2 - Exempt Transactions May be Registered for VAT Purposes


Original text:

SECTION 4.109-2. A VAT-registered person may, in relation to Sec.9.236-1(c) of these Regulations, elect that the exemption in [Subsection (1)]hereof shall not apply to his sales of goods or properties or services. Once theelection is made, it shall be irrevocable for a period of three (3) years countedfrom the quarter when the election was made.

Section 4.110-3 - Claim for Input Tax on Depreciable Goods


Original text:

SECTION 4.110-3. Claim for Input Tax on Depreciable Goods. . . .

(a) . . .

(b) If the estimated useful life of a capital good is less than five (5)years The input tax shall be spread evenly on a monthly basis by dividing theinput tax by the actual number of months comprising the estimated useful life ofthe capital good. The claim for input tax credit shall commence in the [calendar]month that the capital goods were acquired.

Where the aggregate acquisition cost (exclusive of VAT) of the existingor finished depreciable capital goods purchased or imported during any calendarmonth does not exceed One million pesos (P 1,000,000.00), the total input taxeswill be allowable as credit against output tax in the month of acquisition;[Provided, however, that the total amount of input taxes (input tax ondepreciable capital goods plus other allowable input taxes) allowed to beclaimed against the output tax in the quarterly VAT Returns shall be subject tothe limitation prescribed under Sec. 4.110-7 of these Regulations. ]

The aggregate acquisition cost of a depreciable asset in any calendarmonth refers to the total price agreed upon for one or more assets acquired andnot on the payments actually made during the calendar month. Thus, an assetacquired in installment for an acquisition cost of more than P 1,000,000.00 willbe subject to the amortization of input tax despite the fact that the monthly


payments/installments may not exceed P1,000,000.00.

xxx xxx xxx

46 The following sample computation uses the old VAT rate of 10% which is nowat 12%.

Section 4.110-4 - Apportionment of Input Tax on Mixed Transactions


Original text:

SECTION 4.110-4. Apportionment of Input Tax on Mixed Transactions. A VAT-registered person who is also engaged in transactions not subject toVAT shall be allowed to recognize input tax credit on transactions subject toVAT as follows:

1. All the input taxes that can be directly attributed to transactionssubject to VAT may be recognized for input tax credit; Provided, that inputtaxes that can be directly attributable to VAT taxable sales of goods and servicesto the Government or any of its political subdivisions, instrumentalities oragencies, including government-owned or controlled corporations (GOCCs)shall not be credited against output taxes arising from sales to non-Governmententities; and

2. If any input tax cannot be directly attributed to either a VATtaxable or VAT-exempt transaction, the input tax shall be pro-rated to the VATtaxable and VAT-exempt transactions and only the ratable portion pertaining totransactions subject to VAT may be recognized for input tax credit.Illustration:ERA Corporation has the following sales during the month:

Sale to private entities subject to [10%] P100,000.00Sale to private entities subject to 0% 100,000.00Sale of exempt goods 100,000.00Sale to gov't. subjected to5% final VAT Withholding 100,000.00

Total sales for the month P400,000.00

=========

The following input taxes were passed on by its VAT suppliers:

Input tax on taxable goods [(10%)] P5,000.00


Input tax on zero-rated sales 3,000.00Input tax on sale of exempt goods 2,000.00Input tax on sale to government 4,000.00Input tax on depreciable capital goodnot attributable to any specific activity P20,000.00(monthly amortization for 60 months)

A. [The creditable input tax] for the month shall be computed asfollows:

Input tax [on] sale subject to [10%] P5,000.00Input tax on zero-rated sale 3,000.00

Ratable portion of the input tax notdirectly attributable to any activity:

Taxable sales [(0% and 10%)] X Amount of input tax

Total Sales not directlyattributable

[P200,000.00] X P20,000.00 [P10,000.00]400,000.00

[Total creditable input tax] for the month [P18,000.00]

B. The input tax attributable to [sales to government for the month]shall be computed as follows:

Input [tax on sale to gov't.] [P4,000.00]


Taxable sales [to government] X Amount of_ input tax


P100,000.00 X P20,000.00 P5,000.00400,000.00


Total input tax attributable to [sales [P9,000.00]to government]

C. The input tax attributable to VAT-exempt sales for the month shallbe computed as follows:

Input tax [on] VAT-exempt sale P2,000.00


VAT-exempt sales X Amount of input tax


P100,000.00 X P20,000.00 P5,000.00400,000.00

Total input tax attributable to P7,000.00VAT-exempt sales

The table below shows a summary of the foregoing transactions of ERACorporation:

Excess

Input Vat Input Vat Not Total Creditable Net Vat InputInput Unrecoverable

Output Directly Directly Input Input Payable Vat forVatfor Input

Vat Attributable Attributable Vat Vat Carry-Refund Vat

to Any Activity Over/

Sale Subject to [10%]VAT [10,000] 5,000 5,000 10,000 10,000 0 0 0

0

Sale Subject to 0%VAT 0 3,000 5,000 8,000 8,000 0 0 8,000

0

Sale of ExemptGoods 0 2,000 5,000 7,000 0 0 0 0


7,000*

Sale to Governmentsubject to 5% Finalwithholding VAT [10,000] 4,000 5,000 9,000 [5,000]** 5,000*** 0 0

[4,000]*

[* These amounts are not available for input tax credit but may be recognized as cost or expense.]** Standard input VAT of 5% on sales to Government as provided in SEC. 4.114-2(a)*** Withheld by Government entity as Final Withholding VAT

xxx xxx xxx

Section 4.110-6 - Determination of the Output Tax and VAT Payable and Computation ofVAT Payable or Excess Tax Credits


Original text:

SECTION 4.110-6. Determination of the Output Tax and VAT Payableand Computation of VAT Payable or Excess Tax Credits. . . .

There shall be allowed as a deduction from the output tax the amount ofinput tax deductible as determined under Sec. 4.110-1 to 4.110-5 of theseRegulations to arrive at VAT payable on the monthly [VAT] declaration and thequarterly VAT returns[, subject to the limitations set forth in Section 4.110-7].

Section 4.110-7(b) - VAT Payable (Excess Output) or Excess Input Tax


Original text:

SECTION 4.110-7. VAT Payable (Excess Output)t or Excess Input Tax.

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(b) [If the input tax inclusive of input tax carried over from theprevious quarter exceeds the output tax, the input tax [inclusive of input tax]carried over from the previous quarter that may be credited in every quarter shallnot exceed seventy percent (70%) of the output tax; Provided, That, the excessinput tax shall be carried over to the succeeding quarter or quarters; Provided,however, that any input tax attributable to zero-rated sales by a VAT-registeredperson may at his option be refunded or applied for a tax credit certificate whichmay be used in the payment of internal revenue taxes, subject to the limitations


as may be provided for by law, as well as, other implementing rules].


Original text:

SECTION 4.110-7. VAT Payable (Excess Output)t or Excess Input Tax.

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(b) . . .

Illustration:

For a given taxable quarter XYZ [Corp.] has output VAT of 100 andinput VAT of 110. Since input tax exceeds the output tax for such taxablequarter, [the 70% limitation is imposed to compute the amount of input taxwhich may be utilized. The total allowable input tax which may be utilized is 70(70% of the output tax). Thus, the net VAT payable is 100 less 70 = 30. Theunutilized input tax amounting to 40 is carried over to the succeeding month].

Section 4.113-2 - Invoicing and Recording Deemed Sale Transactions


Original text:

SECTION 4.113-2. Invoicing and Recording Deemed SaleTransactions. . . .

Example: "A", at the time of retirement, had 1,000 pieces ofmerchandise which was deemed sold at a value of P20,000.00 with an outputtax of P2,000.00. After retirement, "A" sold to "B", 500 pieces for P12,000.00.In the contract of sale or invoice, "A" should state the sales invoice numberwherein the output tax on "deemed sale" was imposed and the corresponding taxpaid on the 500 pieces is P1,000.00, which is included in the P12,000.00, or heshould indicate it separately as follows:

Gross selling price P11,000.00VAT previously paid on "deemed sale" 1,000.00

Total P12,000.00

In this case, "B" shall be entitled only to P1,000 as input tax and not


[1/11] of P12,000.00

Section 4.114-1 - Filing of Return and Payment of VAT


SECTION 4.114-1. Filing of Return and Payment of VAT.

(A) Filing of Return. . . .

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(B) Payment of VAT

I. Advance Payment . . .

1. Sale of Refined Sugar.

a. . . .

b. . . .

c. Basis for Determining the Amount of Advance VATPayment.

i. Base Price. The amount of advance VAT paymentshall be determined by applying VAT rate of [10%] onthe applicable base price of P850.00 per 50 kg. bag forrefined sugar produced by a sugar refinery, and P 760.00per 50 kg. bag for refined sugar produced by a sugar mill.

ii. Subsequent Base Price Adjustments.

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d.

e. . . .

f. . . .

2. Sale of Flour.

a. . . .

b. . . .


c. . . .

d. Basis for Determining the Amount of Advance VATPayment.

i. Determination of advance VAT. The amount ofadvance VAT payment shall be determined by applyingVAT rate of [10%] on the tax base.

ii. Tax Base . . .

iii. Subsequent tax base adjustments . . .

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Section 4.114-2 - Withholding of VAT on Government Money Payments and Payments toNon-Residents


Original text:

SECTION 4.114-2. Withholding of VAT on Government MoneyPayments and Payments to Non-Residents.

(a) The government or any of its political subdivisions,instrumentalities or agencies, including government-owned or controlledcorporations (GOCCs) shall, before making payment on account of eachpurchase of goods and/or of services taxed at [10%] VAT pursuant to Secs. 106and 108 of the Tax Code, deduct and withhold a final VAT due at the rate offive percent (5%) of the gross payment thereof.

The five percent (5%) final VAT withholding rate shall represent the netVAT payable of the seller. The remaining [five percent (5%)] effectivelyaccounts for the standard input VAT for sales of goods or services togovernment or any of its political subdivisions, instrumentalities or agenciesincluding GOCCs, in lieu of the actual input VAT directly attributable or ratablyapportioned to such sales. Should actual input VAT exceed [five percent (5%)]of gross payments, the excess may form part of the sellers' expense or cost. Onthe other hand, if actual input VAT is less than [5%] of gross payment, thedifference must be closed to expense or cost.

(b) The government or any of its political subdivisions,instrumentalities or agencies, including GOCCs, as well as private corporations,


individuals, estates and trusts, whether large or non-large taxpayers, shallwithhold [ten percent (10%)] VAT with respect to the following payments:

(1) Lease or use of properties or property rights owned bynon-residents;

(2) Services rendered to local insurance companies, withrespect to reinsurance premiums payable tonon-residents[; and

(3) Other services rendered in the Philippines bynon-residents].

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Section 4.114-3 - Submission of Quarterly Summary List of Sales and Purchases


Original text:

SECTION 4.114-3. Submission of Quarterly Summary List of Sales andPurchases.

a. Persons Required to Submit Summary Lists of Sales/Purchases.

(1) Persons Required to Submit Summary Lists of Sales. All persons liable for VAT such as manufacturers,wholesalers, service-providers, among others, [withquarterly total sales/receipts (net of VAT) exceeding TwoMillion Five Hundred Thousand Pesos (P2,500,000.00)].

(2) Persons Required to Submit Summary Lists of Purchases. All persons liable for VAT such as manufacturers,service-providers, among others[, with quarterly totalpurchases (net of VAT) exceeding One Million Pesos(P1,000,000.00)].

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e. Rules in the Presentation of the Required Information in theSummary Schedules.

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(7) The Quarterly Summary List of Sales and Purchases shallbe submitted in [magnetic form using 3.5-inch floppydiskettes] following the format provided in Subsection (g)hereof. [To provide for a clear-cut rule on the mandatorysubmission of the said summary lists in diskette form, thefollowing shall be observed:]

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(a) Submission of said summary lists in diskette form shallbe required for the taxable quarter where the total sales(taxable-net of VAT, zero-rated, exempt) exceed TwoMillion Five Hundred Thousand (P2,500,000.00) or totalpurchases (taxable-net of VAT, zero-rated, exempt)exceed One Million Pesos (P1,000,000.00). Thus, if thetotal quarterly sales amounted to P3,000,000.00 and thetotal quarterly purchases amounted to P900,000.00, thequarterly summary list to be submitted shall only be forsales and not for purchases. On the other hand, if the totalquarterly sales amounted to P2,000,000.00 and the totalquarterly purchases amounted to P1,500,000 then thequarterly summary list to be submitted shall only be forpurchases and not for sales.

(b) Once any of the taxable quarters total sales and/orpurchases exceed the threshold amounts as providedabove, VAT taxpayer, in addition to the requirement thatthe summary list for such quarter be submitted inaccordance with the herein prescribed electronic format,shall be further required to submit the summary lists forthe next three (3) succeeding quarters, still in accordancewith the herein prescribed electronic format, regardless ofwhether or not such succeeding taxable quarter salesand/or purchases exceed the herein set threshold amountsof P2,500,000.00 for sales and P1,000,000.00 forpurchases.

[f. The threshold amounts as herein set for sales andpurchases may be increased/modified by theCommissioner of Internal Revenue if it is necessary forthe improvement in tax administration.]


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[g]. Required Procedure and Format in the Submission ofQuarterly List of Sales/Purchases.

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[(h)] Issuance of Certificate of VAT Withheld at Source

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[(i)] Penalty Clause

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Section 8.229-1 - Issuance of Tax Credit Certificate for Unutilized Advance VATPayments

55 New provisions as added by Section 23, Revenue Regulations No. 4-2007.

Section 9.236-1 - Registration of VAT Taxpayers


Original text:

SECTION 9.236-1. Registration of VAT Taxpayers.

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(b) Mandatory:

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Moreover, franchise grantees of radio and television broadcasting, whosegross annual receipt for the preceding [calendar] year exceeded P10,000,000.00,shall register within thirty (30) days from the end of the [calendar] year.

(c) Optional VAT Registration.

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The above-stated taxpayers may apply for VAT registration not laterthan ten (10) days before the beginning of the [calendar] quarter and shall paythe registration fee prescribed under sub-paragraph (a) of this Section, unlessthey have already paid at the beginning of the year. In any case, the


Commissioner of Internal Revenue may, for administrative reason deny anyapplication for registration. Once registered as a VAT person, the taxpayer shallbe liable to output tax and be entitled to input tax credit beginning on the firstday of the month following registration.

57 As amended by Republic Act No. 10378.

Original text:

i. His gross sales or receipts for the past twelve (12) months, otherthan those that are exempt under Sec. 109 (1)(A) to ([U]) of the Tax Code, haveexceeded One million five hundred thousand pesos (P1,500,000.00); or

ii. There are reasonable grounds to believe that his gross sales orreceipts for the next twelve (12) months, other than those that are exempt underSec. 109 (1)(A) to ([U]) of the Tax Code, will exceed One million five hundredthousand pesos (P1,500,000.00).

Section 9.236-2(7) - Registration of Non-VAT or Exempt Taxpayer


rr 16-05 - amendments

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