Zero Percent (0%) VAT Rate Transactions
- Applies to certain exports, services paid in foreign currency and accounted for properly, services exempt by special laws or international agreements, services rendered to foreign vessels, and subcontracted manufacturing for exporters with over 70% export sales.
VAT Determination
- VAT computed as 1/11 of total official receipt amount.
Exempt Transactions from VAT
- Exemptions include sales of original state food and agricultural products, fertilizers, certain petroleum products, vessels, personal effects of returning residents, professional instruments, educational and medical services, sales by cooperatives, export sales by non-VAT registered persons.
- Specific thresholds exist for exemption such as real property sales below P1,000,000 and residential unit leases below P8,000 monthly, adjusted annually by consumer price index.
- Persons selling or rendering exempt services but issuing VAT invoices are still subject to VAT without input tax credit.
Input Tax Credits
- Transitional input tax credit allowed for new VAT registrants based on inventory value.
- Presumptive input tax credits granted to specific processors (sardines, milk, sugar, cooking oil) and government public works contractors.
VAT Registration
- Persons subject to VAT must register and pay an annual P1,000 fee per business establishment.
- Registration required for businesses expecting VAT-liable income beyond threshold or becoming liable after exceeding sales limit.
- Optional VAT registration allowed for exempt entities.
- Cancellation possible upon cessation of VAT-liability.
Withholding of Creditable VAT
- Government and agencies must withhold 3% VAT on goods and 6% on services payments; 8.5% on public works contractors.
- Lease payments to non-residents subject to 10% withholding tax.
- Withheld VAT credited against VAT liability.
Tax on VAT-Exempt Persons
- Non-VAT registered persons with exempt sales must pay 3% tax on gross quarterly sales, except cooperatives.
Percentage Tax for Domestic and International Carriers
- Domestic carriers pay 3% percentage tax on quarterly gross receipts, with set minimums based on vehicle type and location.
- International air and shipping carriers also pay 3% tax on quarterly gross receipts.
Tax on Franchises
- Broadcasting companies with gross receipts below P10 million pay 3% tax; option to register as VAT taxpayers.
- Electric, gas, and water utilities pay 2% tax on gross receipts.
Business Name Registration
- Businesses not subject to VAT registration must register names or styles and pay annual P500 fee per establishment.
- Cooperatives are exempt from this fee.
Inclusion of Certain Services in VAT Coverage (starting Jan 1, 1998)
- Professional services subject to professional tax, financial intermediary services (non-quasi banking), and lease/use of sports facilities by amateurs become subject to VAT.
- Congress retains power to exclude services from VAT coverage in the public interest.
Rules, Regulations, and IEC Campaign
- Secretary of Finance to promulgate implementing rules within 60 days.
- Various agencies tasked with conducting information and education campaigns on expanded VAT.
Repealing Clause
- Repeals previous Cooperative Code provisions exempting cooperatives from VAT.
- Repeals all inconsistent laws and regulations.
Effectivity
- Law takes effect January 1, 1997.