CHAP. 6- EXEMPT SALES OF GOODS, PROPERTIES & SERVICES
Exempt Sales are exempt consumption of goods or services from domestic sales. Exempt sales are not subject to VAT
and Percentage tax.
Hence,
1) making exempt sale of goods, properties or services shall not bill any output
VAT to their customers because the sale is not subject to VAT.
2) A non-VAT person making exempt sales shall not be subject to the 1%
percentage tax on the sale or receipt.
EXEMPT SALES OF GOODS OR PROPERTIES
1) Sale of goods to Senior Citizens (SC) and Persons with Disability (PWDs)
This covers sale of essential goods only. Aside from VAT exemption,
additional 20% discount is legally mandated.
2) Sale of Exempt Goods
A) Agricultural and marine food products in their original state.
B) Fertilizers, seeds, seedling and fingerlings, fish, prawns, livestock and
poultry feeds, including ingredients used in the manufacture of finished
feeds.
C) Books, newspaper and magazines
D) Medicines prescribed for diabetis and hypertension
E) Passenger or cargo vessels and aircrafts
3) Sale of goods by Cooperatives
Sale by agricultural cooperatives duly registered in good standing with the
Cooperative Development Authority (CDA) to their members, as well as sales
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.
Sales by non-agricultural, non-electric and non-credit cooperatives duly
registered and with good standing with the CDA are vatable.
4) Sale of residential properties
A) Sale of real properties utilized for low-cost housing
B) Sale of real properties utilized for socialized housing.
C) Sale of residential lot valued at P 1,919,500 and below and other
residential dwelling valued at P 3,919, 200 and below.
5) Export sales by Non-VAT person
6) Treaty-exempt sales of goods
Sales of goods, exempt under international agreement to which the
Philippines is a signatory or under special laws.
7) Tax-free exchange of property
The exchange of properties in pursuant to a plan of merger or consolidation
or the transfer of property that resulted in the initial acquisition of corporate
control.
8) Sale of GOLD to the Bangko Sentral ng Pilipinas (BSP)
The sale of gold to the BSP is now a VAT-exempt transaction which is
previously considered a zero-rated sale.
EXEMPT SALES OF SERVICES (Mnemonic: SEARCH VA TRIPS)
1) Schools
Educational services rendered by private educational institution, duly accredited by the Department of Education
(DepED), the Commission on Higher Education (CHED) and the Technical Education and Skill Development
Authority (TESDA) and those rendered by government educational institutions.
2) Employees
Services performed by individuals in pursuant to an employer-employee
relationship.
3) Agricultural contract growers and milling for others of palay into rice, corn into
corn grits and sugar into raw sugar.
4) Residential leasing
Lease of residential units with monthly rental not exceeding P 15,000.
, professionals and sales of drugs by a hospital drug store.
7) Homeowners Association or Condominium Corporations
Association dues, membership fees and other assessments and charges
collected by homeowner’s associations and condominium corporations.
8) Lease passenger or Cargo vessels and aircrafts, including engine equipment and
spare parts thereof for domestic or international transport operations.
9) Treaty-exempt services
10) Regional area headquarters - DEFER
11) International carriers
Transport of passengers by international carriers.
12) Printers or Publishers
Sale, printing or publication of books and any newspaper, magazines, review
or bulletins.
13) Senior Citizens and PWDs – sale of basic essential services.
NOTE: Taxation of the sale of properties held for use is absent in the case of Non-VAT taxpayers. In law, the percentage
tax is limited to the sale of goods or services in the course of business to the exclusion of incidental transactions. The sale
of ordinary assets held for use is not subject to percentage tax.
ILLUSTRATION
A VAT-registered restaurant sold food and beverages totaling P 2,240 to senior citizen who presented a senior citizen
identification card. The senior citizen was accompanied by 3 other non-senior citizens.
Invoice price to senior citizen (2,240 x ¼) 560
Less: Input VAT to SC (560 x 12/112) 60
Sales to SC 500
Less: SC discount (500 x 20%) 100
Net amount due to SC 400
Sale to Non-SC (2,240 x 3/4) 1,680
Total amount to Bill 2,080
In VAT receipts:
Vatable sales 1,500
Sale to SC 500
Output VAT (1,500 x 12%) 180
Total Sales 2,180
A restaurant is a Non-VAT taxpayer:
Total sales 2,240
Less: SC discount (2,240 x 1/3 x 20%) 112
Amount due 2,128
Classify the following as to Exempt or subject to Business Tax (VAT/% tax)
1. sale of live hogs
2. sale of frozen carcass and meat
3. sale of fresh fishes
4. sale of dried and/or smoked fish
5. sale of palay and rice
6. sale of banana
7. sale of mushrooms
8. sale of firewood and charcoal
9. sale of orchids, flowers and bonsai
10. sale of chicken
11. sale of 1-day old chicks
12. sale of eggs for “penoy” and “balot”
13. sale of chicken manure
14. sale of pets
15. sale of animal vitamins, medicines and feeds
16. receipts from veterinary services
17. sale of meat cuts
18. sale of hotdogs
19. sale of cup noodles
Exempt Sales are exempt consumption of goods or services from domestic sales. Exempt sales are not subject to VAT
and Percentage tax.
Hence,
1) making exempt sale of goods, properties or services shall not bill any output
VAT to their customers because the sale is not subject to VAT.
2) A non-VAT person making exempt sales shall not be subject to the 1%
percentage tax on the sale or receipt.
EXEMPT SALES OF GOODS OR PROPERTIES
1) Sale of goods to Senior Citizens (SC) and Persons with Disability (PWDs)
This covers sale of essential goods only. Aside from VAT exemption,
additional 20% discount is legally mandated.
2) Sale of Exempt Goods
A) Agricultural and marine food products in their original state.
B) Fertilizers, seeds, seedling and fingerlings, fish, prawns, livestock and
poultry feeds, including ingredients used in the manufacture of finished
feeds.
C) Books, newspaper and magazines
D) Medicines prescribed for diabetis and hypertension
E) Passenger or cargo vessels and aircrafts
3) Sale of goods by Cooperatives
Sale by agricultural cooperatives duly registered in good standing with the
Cooperative Development Authority (CDA) to their members, as well as sales
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.
Sales by non-agricultural, non-electric and non-credit cooperatives duly
registered and with good standing with the CDA are vatable.
4) Sale of residential properties
A) Sale of real properties utilized for low-cost housing
B) Sale of real properties utilized for socialized housing.
C) Sale of residential lot valued at P 1,919,500 and below and other
residential dwelling valued at P 3,919, 200 and below.
5) Export sales by Non-VAT person
6) Treaty-exempt sales of goods
Sales of goods, exempt under international agreement to which the
Philippines is a signatory or under special laws.
7) Tax-free exchange of property
The exchange of properties in pursuant to a plan of merger or consolidation
or the transfer of property that resulted in the initial acquisition of corporate
control.
8) Sale of GOLD to the Bangko Sentral ng Pilipinas (BSP)
The sale of gold to the BSP is now a VAT-exempt transaction which is
previously considered a zero-rated sale.
EXEMPT SALES OF SERVICES (Mnemonic: SEARCH VA TRIPS)
1) Schools
Educational services rendered by private educational institution, duly accredited by the Department of Education
(DepED), the Commission on Higher Education (CHED) and the Technical Education and Skill Development
Authority (TESDA) and those rendered by government educational institutions.
2) Employees
Services performed by individuals in pursuant to an employer-employee
relationship.
3) Agricultural contract growers and milling for others of palay into rice, corn into
corn grits and sugar into raw sugar.
4) Residential leasing
Lease of residential units with monthly rental not exceeding P 15,000.
, professionals and sales of drugs by a hospital drug store.
7) Homeowners Association or Condominium Corporations
Association dues, membership fees and other assessments and charges
collected by homeowner’s associations and condominium corporations.
8) Lease passenger or Cargo vessels and aircrafts, including engine equipment and
spare parts thereof for domestic or international transport operations.
9) Treaty-exempt services
10) Regional area headquarters - DEFER
11) International carriers
Transport of passengers by international carriers.
12) Printers or Publishers
Sale, printing or publication of books and any newspaper, magazines, review
or bulletins.
13) Senior Citizens and PWDs – sale of basic essential services.
NOTE: Taxation of the sale of properties held for use is absent in the case of Non-VAT taxpayers. In law, the percentage
tax is limited to the sale of goods or services in the course of business to the exclusion of incidental transactions. The sale
of ordinary assets held for use is not subject to percentage tax.
ILLUSTRATION
A VAT-registered restaurant sold food and beverages totaling P 2,240 to senior citizen who presented a senior citizen
identification card. The senior citizen was accompanied by 3 other non-senior citizens.
Invoice price to senior citizen (2,240 x ¼) 560
Less: Input VAT to SC (560 x 12/112) 60
Sales to SC 500
Less: SC discount (500 x 20%) 100
Net amount due to SC 400
Sale to Non-SC (2,240 x 3/4) 1,680
Total amount to Bill 2,080
In VAT receipts:
Vatable sales 1,500
Sale to SC 500
Output VAT (1,500 x 12%) 180
Total Sales 2,180
A restaurant is a Non-VAT taxpayer:
Total sales 2,240
Less: SC discount (2,240 x 1/3 x 20%) 112
Amount due 2,128
Classify the following as to Exempt or subject to Business Tax (VAT/% tax)
1. sale of live hogs
2. sale of frozen carcass and meat
3. sale of fresh fishes
4. sale of dried and/or smoked fish
5. sale of palay and rice
6. sale of banana
7. sale of mushrooms
8. sale of firewood and charcoal
9. sale of orchids, flowers and bonsai
10. sale of chicken
11. sale of 1-day old chicks
12. sale of eggs for “penoy” and “balot”
13. sale of chicken manure
14. sale of pets
15. sale of animal vitamins, medicines and feeds
16. receipts from veterinary services
17. sale of meat cuts
18. sale of hotdogs
19. sale of cup noodles
