RATED
SALES
OF
GOODS
OR
PROPERTIES
Rate: 0% VAT
Transactions: Every sale, barter or exchange, or transactions “deemed sale” of taxable goods or
properties (RR 16-2005)
Zero-Rated Sales on Goods or Property (RR 16- 2005)
A zero-rated sale of goods or properties by a VAT-registered person is a taxable transaction for VAT purposes, but shall not result in any output tax. However, the input tax on purchases of goods, properties or services, related to such zero-rated sale, shall be available as tax credit or refund.
(1) Export Sales
(2) Foreign Currency Denominated Sales (3) Sales of Goods or Property to perons or
entites who are tax-exempt/Effectively Zero-Rated Sales
Export Sales [Sec. 106(A)(2)(a), NIRC]
(1) The (i) sale and actual shipment of goods from the Philippines to a foreign country AND (ii) paid for in acceptable foreign currency or its equivalent in goods or services, AND (iii) accounted for in accordance with the rules and regulations of the BSP
(2) 2.(i) Sale of raw materials or packaging materials to a nonresident buyer (ii) for delivery to a resident local export-oriented enterprise (iii) to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer's goods AND (iv) paid for in acceptable foreign currency AND (v) accounted for in accordance with the rules and regulations of the BSP.
112 a. (i) Sale of raw materials or
packaging materials (ii) to export- oriented enterprise (iii) whose export sales exceed seventy percent (70%) of total annual production.
(3) Any enterprise whose export sales exceed 70% of the total annual production of the preceding taxable year shall be considered an export-oriented enterprise upon accreditation under the rules & regulations of Export Development Act, RA 7844 (RR 7-95)
a. Sale of gold to the Bangko Sentral ng Pilipinas (BSP)
b. The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international air transport operations (RA 9337)
c. Limited to goods, supplies, equipment and fuel pertaining to or attributable to the transport of goods and passengers from a port in the Phil. directly to a foreign port without docking or stopping at any other port in the Phil.
d. If any portion of such fuel, goods, or supplies is used for purposes other than that mentioned, such portion of fuel, goods, and supplies shall be subject to 12% VAT. (RR 16-2005)
e. Those considered export sales under the Omnibus Investment Code of 1987, and other special laws (ex. Bases Conversion & Development Act of 1992)
Under Omnibus Investment Code (EO 226): Considered Export Sales
(1) Phil. port FOB value of export products exported directly by a registered export producer; OR
(2) Net selling price of export products sold by a registered export producer to another export producer, or to an export trader that subsequently exports the same (only when actually exported by the latter) evidenced by landing certificates.
Constructive Exports (without actual exportation):
(1) Sales to bonded manufacturing warehouses of export-oriented manufacturers;
(2) Sales to export processing zones (RA 7916);
(3) Sales to registered export traders operating bonded trading warehouses supplying raw materials in the manufacture of export products (RA 7227) (4) Sales to diplomatic missions and other
agencies and/or instrumentalities granted tax immunities, of locally manufactured, assembled or repacked products, whether paid for in foreign currency or not.
(5) Sales by a VAT-registered supplier to a manufacturer/producer whose products are 100% exported are considered export sales. A certification to this effect must be issued by the Board of Investment which shall be good for 1 year unless subsequently re-issued. (RR 16-2005) Export sales of registered export traders shall include commission income, and that exportation of goods on consignment shall not be deemed export sales until the export products consigned are in fact sold by the consignee.
Foreign Currency Denominated Sale (FCDS) (1) (i) Sale to a nonresident of goods (except
those mentioned in Sections 149 and 150 i.e.automobiles and non-essential goods like jewelry, perfume, and yachts), (ii) assembled or manufactured in the Philippines (iii) for delivery to a resident in the Philippines (iv) paid for in acceptable foreign currency AND (v) accounted for in
113 accordance with the rules and regulations of the BSP.
(2) (i) Sales of locally manufactured or assembled goods (ii) for household and personal use (iii) to Filipinos abroad and other non-residents of the Philippines as well as returning Overseas Filipinos under the Internal Export Program of the government (iv) paid for in convertible foreign currency AND (v) accounted for in accordance with the rules and regulations of the BSP shall also be considered export sales. (RR 16-2005)
Effectively Zero-Rated Sales
(1) Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate.
(2) (i) The local sale of goods and properties (ii) by a VAT-registered person (iii) to a person or entity who was granted indirect tax exemption under special laws or international agreement. (RR 16-2005) ECOZONES
CIR v. Seagate Technology (2005): The ECOZONES shall be managed and operated by the PEZA as separate customs territory. (Sec. 8, RA 7916 “Special Economic Zone Act of 1995”) This means that in such zone is created the legal fiction of foreign territory. (Deoferio Jr.
and Mamalateo, p. 227) Consequently, sales
made by a person in the customs territory to a PEZA-registered entity are considered exports to a foreign country and thus, zero-rated. Conversely, sales by a PEZA-registered entity to a person in the customs territory are deemed imports from a foreign country.
(1) Tax treatment of sales to & by PEZA- registered enterprise within & without the ecozone [rmc 74-99]:
(a) Any sale of goods, property or services made by a VAT registered supplier
from the Customs Territory** to any registered enterprise operating in the ecozone, REGARDLESS of the class or type of the latter’s PEZA registration, is actually qualified and thus LEGALLY ENTITLED TO THE 0% VAT.
(2) Customs Territory shall mean the national territory of the Philippines outside of the proclaimed boundaries of the ECOZONES except those areas specifically declared by other laws and/or presidential proclamations to have the status of special economic zones and/or free ports. [Sec. 2(g), Rule 1, Part I, RA 7916-IRR]
(a) By a VAT-Exempt Supplier from the Customs Territory to a PEZA registered enterprise
(3) Sale of goods, property and services by VAT-Exempt supplier from the Customs Territory to a PEZA registered enterprise shall be treated EXEMPT FROM VAT, regardless of whether or not the PEZA registered buyer is subject to taxes under the NIRC or enjoying the 5% special tax regime.
(a) By a PEZA Registered Enterprise (b) Sale of Goods by a PEZA registered
enterprise to a buyer from the Customs Territory (ie domestic sales) -- this case shall be treated as a technical IMPORTATION made by the buyer. Such buyer shall be treated as an IMPORTER thereof and shall be imposed with the corresponding VAT. (c) Sale of Services by a PEZA registered
enterprise to a buyer from the Customs Territory – this is NOT embraced by the 5% special tax regime, hence, such seller shall be SUBJECT TO 12% VAT. (d) Sale of Goods by a PEZA registered
enterprise to Another PEZA registered enterprise (ie Intra-ECOZONE Sales of
Goods) – this shall be EXEMPT from VAT.
(e) Sale of Services by ECOZONE enterprise, to Another ECOZONE
114 enterprise (Intra-ECOZONE enterprise Sale of Service)
(f) if PEZA registered seller is subject to 5% special tax regime - EXEMPT from VAT
(g) if PEZA registered seller is subject to taxes under NIRC (ie not subject to 5% special tax regime) – subject to 0% VAT pursuant to “cross border doctrine”