After reading this article, you will know if your transaction is VAT Zero Rated.
The following are VAT zero rated transaction:
1. Export Sales
a. The sale goods and services from the Philippines to a foreign country.
Sales of goods will be based on actual shipping of goods from Philippines, irrespective of any shipping arrangements.
b. Sale of raw materials, packaging materials, services to export-oriented enterprise whose export sales exceed seventy percent (70%) of total annual production.
c. Sale and/or leases of goods, supplies, equipment, fuel, services to person engaged in international shipping or air transport operations.
Provided that these goods and services shall be exclusive for international shipping or air transport.
d. Transport of passengers and cargo by domestic air or sea vessels from the Philippines to a foreign Country.
2. Foreign Currency Denominated Sales (FCDS)
a. This is sale to a nonresident of goods and paid for in foreign currency.
This DOESN’T include automobiles and nonessential goods, assembled or manufacture in the Philippines for delivery to a resident in the Philippines and paid for in foreign currency.
3. Sales to persons or entities whose exemptions are covered by special laws or international agreements.
a. Sale to Asian Development Bank (ADB)
b. Sale to International Rice Research Institute (IRRI)
c. Sale to duly registered accredited enterprises with Subic Bay Metropolitan Authority (SBMA)
d. Sale to duly registered and accredited enterprises with Clark Development Authority (CDA)
e. Sale to registered and accredited enterprises with Philippine Economic Zone Authority (PEZA)
4. Sale of power or fuel through renewable sources of energy such as, but not limited to:
a. Biomass,
b. Solar,
c. Wind,
d. Hydropower,
e. Geothermal,
f. Ocean energy,
g. Other emerging energy sources using technologies such as fuel cells and hydrogen fuels.
Provided, however, that zero-rating shall apply strictly to the sale of power or fuel through renewable sources of energy only.
And shall not extend to the sale of services related to the maintenance or operation of plants generating said power.
References:
Tax Reform for Acceleration and Inclusion (TRAIN Law)
Regulation Implementing the Value Added Tax Provision under TRAIN Law (RR 13-2018)
Consolidated Value Added Tax Regulations of 2005 (RR 16-2005)
Further Reading:
1. Value Added Tax in the Philippines
2. What are VAT Exempt Transactions in the Philippines?
What’s Next?
If you have questions and comments regarding tax, accounting, and business registrations, you can contact us here.
