Reference: VAT Exempt Transactions
Contents:
Revenue Regulations No. 4-2015
REVENUE REGULATIONS NO. 4-2015
issued on March 13, 2015 amends further Section 2 of Revenue Regulations (RR)
No. 13-08, as amended by RR No. 13-2013, relative to the definition of raw
sugar and raw cane sugar for Value-Added Tax (VAT) purposes.
Section 2 (b) and (c) of RR No 13-08, as amended by RR
No. 13-2013, was amended to read as follows:
“Section 2. Definition of
Terms. – For purposes of these regulations, the following terms will be
construed to mean:
xxx xxx xxx
(b) Raw Sugar – refers to sugar whose content of sucrose
by weight in dry state, corresponds to a polarimeter reading of less than 99.5ᵒ.
Raw Sugar produced each production year shall be
classified, for internal revenue purposes, as follows:
1. “A” is raw sugar which is intended for export to the
United States Market.
2. “B” is raw sugar which is intended for the Domestic
Market.
3. “C” is raw sugar which is reserved for, but have not
yet matured for release to the Domestic Market.
4. “D” is raw sugar which is intended for export to the
World Market.
5. “E” is reclassified “D” sugar for sale to Food Processors/Exporters
operating Customs Bonded Warehouse (CBW) or to an enterprise located within the
special processing export zone.
xxx xxx xxx
(e) Raw Cane Sugar – refers to
sugar produced by simple process of conversion of sugar cane without need of
any mechanical or similar device such as muscovado. For this purpose, raw cane sugar
refers only to muscovado sugar. Thus, only muscovado is exempt for VAT under
Section 109(1)(A) of the Tax Code. Centrifugal process of producing sugar is
not in itself a simple process. Therefore, any type of sugar produced therefrom
are not exempt from VAT such as raw sugar and refined sugar.
xxx xxx xxx
(f) Sugar as used in these Regulations refers to sugar
other than raw cane sugar.”
Refined sugar and raw sugar, as defined above, shall be
subject to advance payment of VAT by the owner/seller before the sugar is
withdrawn from any sugar refinery mill.
A sale of goods or transactions is considered VAT Exempt if it falls
under SEC 109 –Exempt Transactions. Normally VAT Exempt transactions
are basic necessities such as agricultural products, tuition fees,
lending activities, real properties, books, transportation, etc.
The following are VAT exempt transactions under Section
109 of Tax Code
A. Sale or importation of agricultural, livestock,
poultry, and marine food products in their “original state”, Provided, that the
food is generally used for human consumption.
Livestock or poultry does not include fighting cocks,
racehorses, zoo animals and other animals generally considered as pets.
Polished and/or husked rice, corn grits, raw cane sugar
and molasses, ordinary salt and copra shall be considered as agricultural
products in their original state.
Bagasse is not included in the exemption provided for
under this section.
B. Sale or importation of fertilizers, seeds, seedlings
and fingerlings, fish, prawn, livestock and poultry feeds, including
ingredients, used in the manufacture of finished feeds except specialty feeds.
Specialty feeds refers to food for race horses, fighting
cocks, aquarium fish, zoo animals and other animals generally considered as
pets.
C. Importation of personal and household effects
belonging to residents of the Philippines returning from abroad and
non-resident citizens coming to resettle in the Philippines.
D. Importation of professional instruments and
implements, wearing apparel, domestic animals, and personal household effects
except machinery and other goods use in the manufacture and merchandise of any
kind in commercial quantity belonging to persons coming to settle in the
Philippines.
E. Services subject to Percentage Tax under Title V of
the Tax Code.
F. Services by agricultural contract growers and milling
for others of palay into corn rice, corn into grits and sugar cane into raw
sugar.
G. Medical, Dental, Hospital and Veterinary Services
except those rendered by professional;
H. Educational services rendered by private educational
institutions, duly accredited by the Department of Education (DepEd), the
Commissions on Higher Education (CHED) the Technical Education and Skills
Development Authority (TESDA) and those rendered by the government educational
institutions;
I. Services rendered by individuals pursuant to an
employer-employee relationship.
J. 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.
K. Transactions which exempt under international
agreements to which the Philippines is a signatory under special laws,
Except those under Presidential Decree No. 529 that grant
Petroleum Exploration Concessionaires exemption from Custom Duty and Tax of
Importation Machinery required for their Exploration Operation.
L. Importation by agricultural cooperatives 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.
M. Gross Receipts from lending activities by credit or
multi-purpose cooperatives.
N. Sales by non-agricultural, non-electric and non-credit
cooperatives.
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.
O. Export sales by person who are not VAT-registered;
P. Sale of real properties not primarily held for sale to
customers or held for lease in the ordinary course of trade or business or sale
residential lot valued at One million five hundred thousand pesos (P1,500,000)
and below or sale of house and lot, and other residential dwellings valued at
Two Million Five Hundred Thousand Pesos (P2,500,000) and below;
Provided, That beginning January 1, 2021, the VAT
exemption shall only apply to sale of real properties not primarily held for
sale to customers or held for lease in the ordinary course of trade or business
or sale of house and lot, and other residential dwellings with selling price of
not more than Two Million Pesos (P2,000,000).
Q. Lease of residential unit with a monthly rental not
exceeding Fifteen Thousand pesos (P15,000).
R. Sale, importation, printing or publication of books
and any newspaper, magazine, review or bulletin which appears at regular
intervals with fixed prices or subscription and sale and which is not devoted
principally to the publication of paid advertisements.
S. Transport of passengers by international carriers
T. Sale, importation or lease of passenger or cargo
vessels and aircraft, including engine, equipment and spare parts thereof for
domestic or international carriers.
U. Importation of fuel, goods and supplies by persons
engaged in international shipping or air transport operations.
Provided, that the fuel, goods, and supplies shall be
used for international shipping or air transport operations.
V. Services of bank, non-bank financial intermediaries
performing quasi-banking functions, and other non-bank financial
intermediaries.
W. Sale or lease of goods and services to senior citizens
and persons with disability, as provided under Expanded Senior Citizen Act of
2010 and An Act Expanding the Benefits and Privileges of Persons with
Disability, respectively.
X. Tax-Free Exchanges of Properties pursuant to Section
40 (C) (2) of the NIRC of 1997.
This can be:
1. Transfer to a controlled corporation;
2. Merger or consolidation.
No gain or loss shall be recognized if a property is
transferred to a corporation by a person or corporation in exchange for stock.
Y. Association Dues, Membership fees, and other
assessments and charges collected by homeowners associations and condominium
corporations
Z. Sale of gold to the Bangko Sentral ng Pilipinas (BSP)
AA. Sale of drugs and medicines prescribed for diabetes,
high cholesterol, and hypertension beginning January 1, 2019.
BB. Sale or lease of goods 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 Three
Million Pesos (P3,000,000).
References:
Tax Reform for Acceleration and Inclusion (TRAIN Law)
Regulation Implementing the Value Added Tax Provision
under TRAIN Law (RR 13-2018)
Consolidated Value Added Tax Regulations of 2005 (RR
16-2005)
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