More VAAAAAT!!!

Don't fret. This is not as bad as the other articles. After reading about VAT and more Vat, this article is more of on how you can protect yourself from VAT, and be more aware of its hidden dangers.

Transactions Exempt from VAT

1.) Sale/production for agricultural and maritime food products in their original state (includes simple preservation like freezing, drying, salting, smoking, broiling or stripping, as well as polished and/or husked rice, corn grits, raw cane sugar and molasses, and ordinary salt and copra) livestock and poultry of a kind generally used as, or yielding/producing food for human consumption and genetic materials therefore.

2.) Sale/importation of fertilizers; seeds seedlings and fingerlings; prawn, livestock and poultry feeds, including ingredients either locally produced or imported used in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets.)

3.) Importation of personal an household effects belonging to residents of the Philippines returning from abroad and non-resident citizens resettling in the Philippines (balikbayan) as long as these goods are exempt from customs duties under the Tariff and Customs Code.

4.) Importation of professional instruments and implements, wearing apparel, domestic animals and personal household effects belonging to persons coming to settle in the Philippines, for their own use and not for sale, barter, or exchange, accompanying such persons or arriving withing 90 days before or after arrival upon production of evidence satisfactory to the Immigration Commissioner that such persons are actually coming to settle in the Philippines and change of residence is bona fide. This doesn't include vehicles, vessels, aircraft, machinery and other goods used in the manufacture and merchandise of any kind in commercial quantity.

5.) Services subject to percentage tax under Title 5 of the tax code.

6.) Services by agricultural contract growers and milling for others of palay into rice, corn into grits and sugar cane into cane sugar.

7.) Medical, dental, hospital and veterinary services not rendered by professionals.

8.) Educational services rendered by private educational institutions duly accredited by the DEPED, CHED, TESDA and those rendered by government educational institutions.

9.) Services rendered by individuals in an employer-employee relationship.

10.) 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.

11.) Transactions exempt under international agreements where the Philippines is a signatory or under special laws, except those under PD 529.

12.) Sales by agricultural cooperatives duly registered with the Cooperative Development Authority to their members as well as sale of their produce, whether in original state or processed form to non-members; their importation of direct farm inputs, machinery and equipment, including their spare parts, to be directly and exclusively used in the production and/or processing of their produce.

13.) Gross receipts from lending activities by credit or multipurpose cooperatives duly registered with the Cooperative Development Authority.

14.) Sales by non-agrucultural, non-credit and non- electric cooperatives duly registered with the Cooperative Development Authority, provided each member's share capital doesn't exceed Php15,000 and regardless of aggregate capital and net surplus distributed among the members pro rata.

15.) Export sales by persons who aren't VAT-registered.

16.) Sale of real property not primarily held out for sale to customers or held for lease in the ordinary course of business or real property used for low-cost and socialized housing (which is valued at not more than Php225,000 per unit) under RA7279 (Urban Development & Housing Act) and other related laws, residential lot valued at Php1,919,500 and below, house and lot and other residential buildings valued at Php3,199,200 and below (provided their amounts are adjusted to their present values using the Consumer Price Index as published by the NSO every 3 years.

17.) Lease or residential unit where the monthly rental doesn't exceed Php12,800 per unit, with the same condition under No.16.

18.) Sale, importation, printing and publication of books and any newspaper, magazine, review or bulletin which appears at regular intervals with fixed prices for subscription and sale and not principally devoted to the publication of paid advertisements.

19.) Sale, importation or lease of passenger or cargo vessel and aircraft, including its engine, equipment and spare parts, for domestic and international transport operations.

20.) Importation of fuel, goods and supplies by persons engaged in international shipping or air transport operations.

21.) Services of banks, non-bank financial intermediaries performing quasi-banking functions, and other non-bank financial intermediaries.

22.) Sale or lease of goods or properties or performance of services other than the above-listed transactions where the gross annual sales and/or receipts don't exceed Php1,919,500 with the same condition in No. 16.

Note: regarding 16 and 17, it won't matter if several adjacent lots were bought by the same buyer. What matters is the total purchase price of the lots. Also, if you have several units for rent where the price is higher than Php12,800 per month for each unit, you won't pay VAT if the total  income from rent collections doesn't exceed Php1,919,500 per year. In other words, you can have millions in annual rental income but not pay VAT if all your units' rentals don't exceed Php12,800; and you can also have rentals higher than Php12,800 per unit as long as the total annual rental income from all units doesn't get higher than Php1,919,500. It won't matter how many units you rent out.