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VAT 0% and VAT-exempt, what’s the difference?

pinoytaxation — Sun, 09 Aug 2009 05:41:21 +0000

As to taxability in VAT, it may be said to be VATable or non-VATable. If VATable, it maybe subject to 12% regular rate or 0% under certain conditions. On the other hand, if non-VATable, it maybe VAT-exempt covering those which are not subject to VAT but subject to other percentage tax (OPT) of 3%, or those which are neither subject to VAT nor to OPT. In the above items, the law provides which are VATable and at what rate, those which are non-VATable but subject to OPT, and those which are non-VATable and not subject to OPT. The general rule is VATable, and the exception is non-VATable, which must be expressly or impliedly covered by a law or regulation. Seems so confusing, right?

In the meantime let us differentiate the features of zero-rated and VAT exempt to simply understand their nature.

Zero-rated are subject to VAT at the rate of 0%, while VAT exempt are not subject to VAT as it enjoys immunity from VAT imposed by law or a treaty;
Input VAT is allowed to be credited in zero-rated against the output taxes to compute the VAT due at the end of the month or quarter, while in VAT exempt input VAT is treated as an expense or part of cost of the property or goods purchased;
At the option of the VAT-registered taxpayer, input taxes from zero-rating is eligible for tax refund or tax credit within two (2) years from the time sales are made, while in VAT exempt, no tax refund or tax credit is allowed

From the above distinctions, the material factor is on the application of VAT and the use of input taxes. Examples of zero-rated sale is exportation of goods, sales from the customs territory to economic zone registered entity, foreign currency denominated sales, and the likes. On the other hand, a typical example of VAT exempt sale is a sale in between two economic zones enjoying special privileges, and those enumerated in Section 109 of the Tax Code, as amended.

Please note that VAT exemption in Section 109 covers both VAT and OPT because the exemption covers the transaction itself, as defined in the Tax Code or in relation to the special laws. Section 109 is an attempt to consolidate VAT exemptions, but is not all inclusive and the Congress may from time to time legislate new VAT exemptions. However, exception is made with due respect to subsections 109(E) on percentage taxes imposed on other provisions of the tax Code, as amended, and 109(V) on VATable entities failing to come-up with the PhP1.5M gross sales or receipts that is nevertheless subjected to 3% OPT instead of the 12% VAT.

First time blogger

pinoytaxation — Thu, 06 Aug 2009 14:04:41 +0000

One mid-April 2009 evening while I was on my friendster account, I happen to view a personal blog of a friend (rtfverterra.com) and that fascinates me to explore the wonderful world of modern day blogging. Such blog further brought me to his educational site – mathalino.com and this brought me an idea of making my own site for taxation. It was quite ambitious for me to dream of that, but as an educator, i saw on my mind how it will help students and many others educate themselves, if not find helpful materials in the topic.

While I hear and read a few t.v news and on the papers, I have a very limited understanding on this thing. In a short while, I tried to surf the net to grasp for some blogging basics tutorials and finally end up with two (2) free blogging platforms: Blogger and Wordpress. Every login to my account is an adventure, almost every mouse click is an experiment, and every post is an exploration trying my very hard to learn. Thanks i got a copy of blogbash and learn some ideas and concepts. And for that, i wish to share this to you.

Get free eBook Now!

In line with my employment and my professional dealings, is my great interest in the subject, Philippine taxation and doing business. It is a quite broad and complex subject that in my observation and personal experience, college business students, law students, accountancy reviewees and even professionals find hard times applying various rules and procedures. To be candid, I graduated my college days with a limited understanding of the subject until later during my CPA review sessions when I found the pressing need to learn the subject in order to hurdle the board exams, and I successfully did.

Thus, this blog would try to invite interactions and views on particular topics at hand to enhance everybody’s appreciation and understanding, and easy application. Accordingly, readers and viewers of interest may freely interact with and submit their views and comments on the articles and issue at hand. To the readers, I personally invite your attention to the success and to the furtherance of this blog. To the professionals and knowledgeable, I believe this simple present may help a lot to those in need of a better understanding and picture of the Philippine taxation with no cost at all. Come along with me and join with us, as we tackle the difficult and mind bugling issues in Philippine taxation. May God Bless Us All!

Introducing my upgraded site

pinoytaxation — Tue, 04 Aug 2009 11:37:56 +0000

I am proud to announce that I have already made material upgrade and updates on my tax site (blog), the pinoytaxation.com. This is the fruit of my extensive hours of exploration and sincere intention to learn and develop a site has further developed after a lot of patience on exploring and learning about site development and maintainance.

The site now looks more of a true site, a seemingly higher level than the previous one. As i promised, more articles are coming in this site and each article is well-crafted by the author, himself, to express the important points of the article. Though this is a success for me as a “pure beginner”, my thirst for learning website development and maintainance does not end here. In the near future and from time to time, i might be effecting some changes as i experiment on what I think can more better serve the needs of my visitors and users. In the meantime, i wish to express my heartfelt gratitude to the following who, in a way or another has helped me:

a. RTFverterra for the clue and concept I got from his site and some helpful hints,
b. VicLogic for the friendly assistance, helpful tips and advices;
c. Klodian for my previous free template;
d. Just host for the 50% discount on unlimitedly hosting my site and for the unlimited domains on such hosting;
e. Kaloy for the lesson and for the great encouragement of the do-it-yourself option; and,
e. To you all my visitors and friends for the encouragement and support.

As a token of gratitude to them, i included hereunder a link to their sites so you could get to know them also:
a. RTV Verterra of Mathalino.com
b. Vic of BusinessAccent
c. Klodian of deluxe templates
d. Just Host; and
e. Kaloy of hostphilippines

I hope and pray that we succeed in all our undertakings and good intentions. God Bless my friend and good day.