THE 30 VAT exemptions that the government wants lifted cover:
• Agricultural and marine food products in their original state;
• Livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption;
• Breeding stocks and genetic materials;
• Fertilizers;
• Seeds, seedlings and fingerlings;
• Fish, prawn, livestock and poultry feeds;
• Ingredients, whether locally produced or imported, used in the manufacture of finished feeds;
• Importation of personal and household effects belonging to residents of the Philippines returning from abroad and non-resident citizens coming to resettle in the Philippines;
• Importation of professional instruments and implements;
• Wearing apparel;
• Domestic animals;
• Services by agricultural contract growers and milling for others of palay into rice, corn into grits, and sugar cane into raw sugar;
• 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;
• Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws except those granted under Presidential Decree 529;
• Sales by agricultural cooperatives duly registered and in food standing with the Cooperative Development Authority (CDA) to their members, as well as of their produce, whether in its original state or processed form, to non-members, their importation of direct farm inputs;
• Machineries and equipment, including spareparts, to be used directly and exclusively in the production and/or processing of their produce;
• Gross receipts from lending activities by credit or multipurpose cooperatives duly registered and in good standing with the CDA;
• Sales by non-agricultural, non-electric and non-credit cooperatives duly registered with and in good standing with CDA;
• Export sales by persons who are not VAT-registered;
• Sales of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business;
• Sale of real properties utilized for low-cost housing as defined by Republic Act 7279, and other related laws;
• Sale of real properties utilized for specialized housing as defined under RA 7279, and other related laws wherein price ceiling per unit is P225,000;
• Sale of residential lot valued at P1.5 million and below, or house and lot and other residential dwellings valued at P2.5 million and below where the instrument of sale/transfer/disposition was executed on or after July 1, 2005;
• Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the amount of P1.5 million;
• Importation of fuel, goods and supplies engaged in international shipping or air transport operations;
• Services subject to percentage tax under Title V or the Code, as amended;
• Services of banks, non-bank financial intermediaries performing quasi-banking functions and other non-bank financial intermediaries, such as money changers and pawnshops.
The government is also considering lifting VAT exemptions recently granted through a law authored by Leyte Rep. Martin Romualdez. These include
• Senior citizens
• People with disabilities and
• Renewable energy.
The 13 VAT zero-rated transactions that may lose their exemptions are:
• The sales and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the foods so exported, paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas;
• The sale of raw materials or packaging materials to a non-resident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer’s goods, paid for in acceptable foreign currency, and accounted for in accordance with the rules and regulations of the BSP;
• The sale of raw materials to an export-oriented enterprise whose export sales exceed 70 percent of total annual production;
• Sale of gold to the BSP;
• Transactions considered export sales under Executive Order 226 otherwise known as the Omnibus Investments Code of 1987, and other special laws;
• The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international air transport operations, provided, that the same is limited to goods supplies, equipment and fuel pertaining to or attributable to the transport of goods and passengers from a port in the Philippines directly to a foreign port without docking or stopping at any other port in the Philippines, provided further, that if any portion of such fuel, foods or supplies is used for purposes other than that mentioned in this paragraph, such portion of fuel, goods and supplies shall be subject to 10 percent VAT;
• The sale to a non-resident of goods, except those mentioned in Sections 149 and 150 of the Tax Code, assembled or manufactured in the Philippines for delivery to a resident in the Philippines, paid for in acceptable foreign currency and accounted for in accordance with the ruled and regulations of the BSP;
• Processing, manufacturing or repacking goods for other persons doing business outside the Philippines, which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP;
• Services other than processing, manufacturing or repacking rendered to a person engaged in business conducted outside the Philippines or to a non-resident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP;
• Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent rate;
• Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sales exceed 70 percent of the total annual production;
• Transport of passengers and cargo by domestic air or sea carriers from the Philippines to a foreign country. Gross receipts of international air carriers doing business in the Philippines and international sea carriers doing business in the Philippines are still liable to a percentage tax of three percent based on their gross receipts as provided for in Sec. 118 of the Tax Code but shall not be liable to VAT;
• Services to persons engaged in international shipping or air transport operations, including leases of property for use thereof, provided that the services referred to herein shall not pertain to those made to common carriers by air and sea relative to their transport of passengers, goods or cargoes from one place in the Philippines to another place in the Philippines.
