Question & AnswerQ&A (BIR REGULATIONS NO. 14-94)
The regular conduct or pursuit of a commercial or economic activity, including incidental transactions, by any person, regardless of whether the person is a non-stock, non-profit organization or government entity. Businesses with gross sales or receipts not exceeding P100,000 during any 12-month period are considered for subsistence or livelihood and not in the course of trade or business.
Export sales are considered as those under Articles 23 and 77 of Executive Order No. 226 (Omnibus Investments Code of 1987) and other special laws like Republic Act No. 7227 (Bases Conversion and Development Act of 1992).
Lending Investors include all persons, other than banks and financial intermediaries, who make a practice of lending money for themselves or others at interest.
The seller is subject to VAT on the installment payments, including interests and penalties, actually received on or after October 1, 1994.
No, subsequent payments on a deferred-payment basis not on the installment plan made on or after October 1, 1994 are not subject to VAT as these obligations are considered equivalent to cash.
Zero-rated sales include export sales, sales to persons/entities exempt under special laws or international agreements, services to ships engaged exclusively in international shipping, and services by BOI- or Export Development Council-accredited subcontractors processing goods for exporters exceeding 70% of production.
Academic, technical, or vocational education provided by accredited private and government educational institutions, including sale or rental of textbooks, are exempt from VAT. Non-accredited services like seminars or review classes are not exempt.
Cooperatives (except electric cooperatives), registered under RA No. 6938, transacting business with members only or with members and non-members, are subject to VAT.
Businesses with gross sales or receipts not exceeding P100,000 during any 12-month period are exempt from VAT and applicable percentage tax.
They shall be liable for VAT starting October 1, 1994 but cannot pass on the VAT to customers, claim input tax credits on purchases, and buyers cannot claim input tax credits for purchases from such sellers.
They must issue duly registered receipts or sales/commercial invoices in at least duplicate—the original given to the buyer, the duplicate retained. For sales between VAT-registered taxpayers, invoices must show registered name, TIN, and address of purchaser.
Government entities must withhold VAT at 3% on gross payments for goods and 6% on gross receipts for contractor services, creditable against the seller's VAT liability, except for payments of P1,000 or below.
Taxpayers registered for VAT as of September 30, 1994, are entitled to a presumptive input tax based on inventory value and improvements, as detailed in the regulations, to be credited against output tax.
Foreign and local donations to religious institutions and sales of religious articles like bibles, crucifixes, and vestments for actual, direct, exclusive religious use and not in the ordinary course of trade or business are exempt.
Taxpayers must register according to their group classification, pay registration fees, submit inventory lists of unused invoices/receipts, and stamp unused non-VAT invoices with the phrase 'VAT-registered as of ____, 1994'. Failure to register results in VAT liability but no passing on of VAT or input credits.