THEORIES death is no longer required.

Extension of payment is not Extension of payment may be

BENEFITS RECEIVED THEORY - for the performance of provided. granted by the CIR.
services rendered by the government in the distribution of the Payable within 30 days from Payable within 6 months from
estate of the decedent or other benefits which accrue to the the date of gift. the date of death.
heirs and estate, the State collects the tax.
Under the TRAIN - return
REDISTRIBUTION OF WEALTH THEORY - Estate tax is a must be filed within 1 year. In
contributing factor to the inequalities in wealth and income. case the available cash of the
The imposition of death tax reduces the inheritance received estate is insufficient to pay
by the successor, bringing about a more equitable distribution the total estate tax due,
of wealth in society. payment by installment shall
be allowed within 2 years
ABILITY TO PAY THEORY - the receipt of inheritance places from the statutory date for its
assets in the hands of the heirs, thereby creating the ability to payment without penalty and
pay the tax and, thus, the ability to contribute to interest.
governmental income. Accrues upon execution of Accrues upon the death of
deed of donation, or upon the decedent.
PRIVILEGE THEORY/STATE PARTNERSHIP THEORY - delivery or acceptance of
The State, as a passive and silent partner in the accumulation donation.
of property, has the right to collect the share which is properly Imposed on the net gift. Imposed on the net estate.
due it.

ESTATE/DEATH TAX ESTATE TAX

 It is a graduated tax imposed on the privilege of the
decedent to transmit property at death, and is based on Extension of Payment of ESTATE TAX
the entire NET ESTATE, regardless of the number of 1. If there is NO NEED for judicial settlement - period
heirs and their relations to the decedent. may be extended up to 2 years.
2. If there is NEED for judicial settlement - CIR may
 It is not a tax on property, but on the right of the extent period up to 5 years.
decedent to transmit his estate.
GROSS ESTATE - qualify if:
DONOR’S/GIFT TAX a. RESIDENT CITIZEN, NON-RESIDENT CITIZEN and
 It is imposed on the gratuitous transfers of property RESIDENT ALIEN:
during one’s lifetime. 1. Real property within and without the Philippines;
2. Tangible personal property within and without the
 It is not a tax on property, but on the privilege of the Philippines;
donor to give or on the privilege of the donee to receive. 3. Intangible personal property within and without the
Philippines.
SIMILARITIES BETWEEN ESTATE AND DONOR’S TAX
(Under the OLD LAW): PEEP b. NON-RESIDENT ALIENS:
1. “Pay as you file return” is required. 1. Real property within the Philippines;
2. Both allow Exemptions. 2. Tangible personal property within the Philippines;
3. Both are Excise taxes. 3. Intangible personal property within the Philippines,
4. In both, Progressive scheme is applicable. unless there is RECIPROCITY, in which case, it is
not taxable.
Under the TRAIN LAW:
a. In ESTATE TAX, if the estate has insufficient cash, it is  RECIPROCITY applies when the decedent is a (1)
allowed to pay the estate tax due within a period of 2 non-resident citizen and (2) the property is
years, without penalty and interest (no more “pay as you intangible.
file return”).  There is reciprocity if the foreign country of which
b. No longer PROGRESSIVE, but already a FIXED RATE! the decedent is a resident at the time of his death:
a. Did not impose an estate tax; or
DISTINCTIONS BETWEEN DONOR’S TAX AND ESTATE b. Allowed a similar exemption from estate tax
TAX (Under the OLD LAW and TRAIN LAW): TRFN-EPAI with respect to intangible personal property
DONOR’S TAX ESTATE TAX owned by Filipino citizens residing in that
Tax on the privilege to Tax on the privilege to country.
Transfer property during the Transfer property upon
lifetime of the donor. one’s death. The following INTANGIBLES are deemed located in the
Tax Rates are 2-5%. Tax Rates are 5-20%. PHILIPPINES: F-SSSS
c. Franchises which must be exercised in the Philippines;
Under the Train - 6% Under the Train - 6% d. Shares, obligations or bonds (SOB) issued by any
First P100,000 is exempt. First 200,000 is exempt. corporation or sociedad anonima organized or constituted
in the Philippines in accordance with its laws;
Under the Train - first Under the Train - No e. SOBs issued by any foreign corporation 85% of the
P250,000 is exempt. exemption. Tax is 6% of net business of which is located in the Philippines;
taxable estate. f. SOBs issued by any foreign corporation which have
Notice of donation generally Notice of death is required. acquired situs in the Philippines;
not required. g. Shares or rights in any partnership, business, or industry
Under the Train - notice of established in the Philippines.
 of special deductions.
TRANSFER IN CONTEMPLATION OF DEATH
 A transfer is considered made in contemplation of death  Under the TRAIN LAW - the following are
when the IMPELLING MOTIVE OR REASON for the deducted from gross non-resident estates: SP-PT
transfer is the thought of death, regardless of whether 1. Standard deduction - P500,000;
the transferor is near the possibility of death or not. 2. Proportion of deductions of (1) claims against
estate, (2) claims against insolvent persons, and
 If the donation or transfer is made to a person (3) unpaid mortgages or indebtedness on property,
who is NOT A FORCED HEIR - the presumption is that which the value of such part bears to the value of
such transfer is a donation inter vivos. his entire gross estate wherever situated;
3. Property previously taxed;
 If the recipient is a FORCED HEIR - the presumption 4. Transfer for public use.
is that such transfer was made to accelerate the
inheritance; hence, such transfer is MORTIS CAUSA. FUNERAL EXPENSES CONDITIONS (old law): PUA
1. Whether Paid or unpaid;
What ITEMS or TRANSFERS should be INCLUDED IN 2. Up to the amount of interment;
THE GROSS ESTATE? DT-RP-PT 3. The Actual amount or in an amount equal to 5% of the
1. Decedent’s interest at the time of death; gross estate, whichever is lower, but in no case to
2. Transfers in contemplation of death; exceed P200,000.
3. Revocable transfers;
4. Property under general power of appointment;  No more deduction for funeral expenses under
5. Proceeds of life insurance taken out by the decedent TRAIN.
upon his own life where the (1) beneficiary is the estate,
his executor or administrator, irrespective of whether it is JUDICIAL EXPENSES CONDITIONS (old law):
revocable or not, or (2) any beneficiary designated as  They must be incurred during the settlement of the
revocable. estate, but not beyond the last day prescribed by law, or
6. Transfer for insufficient consideration - the excess of the the extension thereof, for the filing of the estate tax
fair market value at the time of the death over the value return.
of the consideration received by the decedent shall form
part of his gross estate.  No more deduction for judicial expenses under
TRAIN.
REQUIREMENTS - estate tax return under oath must be
filed in all cases of transfers subject to estate tax, or CLAIMS AGAINST ESTATE CONDITIONS - must be:
regardless of the gross value of the estate, where the said PCDN
estate consists of registered or registrable property for which a 1. A Personal obligation of the deceased existing at the time
clearance form the BIR is required as a condition precedent for of his death;
the transfer of ownership thereof in the name of the 2. Contracted in good faith;
transferee. - TRAIN 3. Debt or claim which is valid in law and enforceable in
court;
 Estate tax returns showing a GROSS VALUE 4. Not condoned by the creditor, or action to collect has not
exceeding P5 million shall be supported with a prescribed.
statement duly certified to by a CPA. - TRAIN
 Post-death developments should not be
DEDUCTIONS FROM GROSS ESTATE (Under OLD LAW considered in determining the net value of the
and TRAIN) estate.
1. ORDINARY DEDUCTIONS: EVT
a. Expenses, Losses, Indebtedness, Taxes, ELIT etc.: CLAIMS AGAINST INSOLVENT PERSONS CONDITIONS:
FJ-C-CLUT AI
1) Funeral expenses - no longer deductible under 1. Amount must be initially included as part of the gross
TRAIN estate;
2) Judicial expenses - no longer deductible under 2. Incapacity of debtors to pay must be proven, not
TRAIN merely alleged.
3) Claims against estate
4) Claims against insolvent persons UNPAID MORTGAGE OR INDEBTEDNESS ON PROPERTY
5) Losses CONDITIONS: FC
6) Unpaid mortgage or indebtedness on property 1. Fair market value of property mortgaged, without
7) Taxes deducting the indebtedness, has been initially included as
part of the gross estate;
b. Vanishing deductions 2. Contracted in good faith, and for an adequate and full
c. Transfer for public use consideration in money or money’s worth.

2. SPECIAL DEDUCTIONS: FAMS TAXES CONDITIONS: AU

a. Family home - P1 million; P10 million under TRAIN 1. Accrued as of or before decedent’s death;
b. Amount received by heir under RA 4917 2. Unpaid as of the time of his death.
c. Medical expenses - P500,000 max; removed under
TRAIN  Vera v. Fernandez - Taxes against the estate of a
d. Standard deduction - P1 million; P10 million under deceased person need not be submitted to the
TRAIN committee on claims in the ordinary course of
administration. They may be collected even after
 Under the OLD LAW - non-resident aliens cannot avail the distribution of the decedent’s estate among his
 heirs who shall be liable therefore in proportion to in the gross estate; or
their share in the inheritance. b. Extent of decedent’s interest, whichever is lower;
3. Deduction not to exceed P1,000,000.

LOSSES CONDITIONS: IANNI  The limit is now P10,000,000 under the TRAIN.
1. Incurred during estate settlement; STANDARD DEDUCTION
2. Arose from fires, storms, shipwrecks or other casualties,  P1,000,000 under the OLD LAW.
or from robbery, theft or embezzlement;
3. Not compensable;  P5,000,000 under the TRAIN.
4. Not claimed as a deduction for income tax purposes;
5. Incurred not later than the last day for payment of the MEDICAL EXPENSES CONDITIONS (old law): SIN
estate tax. 1. Substantiated by receipts;
2. Incurred by decedent within 1 year prior to his death;
VANISHING DEDUCTIONS 3. Not exceed P500,000.
 CONCEPT: Deduction allowed on the property left by the
decedent which he had acquired previously by  No deduction for medical expenses under the
inheritance or donation. TRAIN.

 PURPOSE: To minimize the effects of double taxation on NET SHARE OF THE SURVIVING SPOUSE
the same property within a short period of time.  Determine if the property regime is CONJUGAL
PARTNERSHIP OF GAINS or ABSOLUTE COMMUNITY OF
 CONDITIONS: P-PIPE PROPERTY.
1. Property forms part of the gross estate of present
decedent;  Default property regime before Aug. 3, 1988 -
2. Present decedent acquired such property by CONJUGAL PARTNERSHIP OF GAINS.
inheritance or donation within 5 years prior to his
death;  Aug. 3, 1988 and present - ABSOLUTE COMMUNITY
3. Identity of property; OF PROPERTY.
4. Property acquired formed part of the gross estate of
the prior decedent, or of the taxable gift of the “
donor; CONJUGAL PARTNERSHIP OF GAINS
5. Estate of prior decedent has not previously availed
of vanishing deduction. It includes all properties acquired during the marriage,
whether the acquisition appears to have been made,
 PROCESS: contracted or registered in the name of one or both spouses.
1. Determine initial value by comparing FMV of the
property used in computing the first transfer tax It includes: FLOCH
paid with the FMV of the property in the present 1. Fruits due or received during the marriage from the
decedent, whichever is lower. common property and exclusive properties of each
2. From such value, deduct the mortgage or lien. The spouse.
result is the INITIAL BASIS. 2. Those obtained from Labor, industry, work or profession
3. (Deductions / Gross Estate) x Initial Basis = Portion of either or both of the spouses.
Deductible. 3. Those acquired by Onerous title during the marriage at
4. Initial Basis - Portion Deductible = Amount to be the expense of the common fund.
multiplied by % 4. Those acquired by Chance; however, losses shall be
5. Determine time interval to find the applicable borne by the loser spouse.
percentage of vanishing deduction. 5. Hidden treasure share of each spouse.
6. Multiply the final basis by the percentage of final
deduction to arrive at the vanishing deduction. Exclusive property of each spouse: BG-RP
1. Brought to the marriage as his/her own;
More than Not more than % 2. Acquired during the marriage by Gratuitous title;
Xx 1 year 100% 3. That which is acquired by Right of redemption, by barter
1 year 2 years 80% or by exchange with property belonging to only one of
2 years 3 years 60% the spouses;
4. Purchased with the exclusive money of husband/wife.
3 years 4 years 40%
4 years 5 years 20%
5 years xx xx
ABSOLUTE COMMUNITY OF PROPERTY
TRANSFER FOR PUBLIC USE
Consists of all the property owned by the spouses at the time
 Refers to the amount of all bequests, legacies, devises,
of the celebration of the marriage or acquired thereafter.
or transfers to or for the use of the Government or any
political subdivision thereof, for exclusive public
Exclusions:
purposes.
1. Property acquired during the marriage by Gratuitous title
by either spouse, and the fruits as well as the income
FAMILY HOME CONDITIONS - must be:
thereof, if any.
1. The Actual residential home of the decedent and his
 Exception: If provided for by the donor, testator or
family at the time of his death, as certified by the brgy.
grantor that they shall form part of the community
Captain;
property.
2. Amount is equivalent to:
a. Current FMV of family home as declared or included
2. Property for Personal and exclusive use of either spouse. Philippine Estate Tax = Chorva.
 Exception: Jewelry. b. Compare Chorva to the amount determined in the
first limit.
3. Property acquired Before the marriage by either spouse c. Determine which of them is lower and deduct it
who has legitimate descendants by a former marriage, from the Philippine estate tax as determined in No.
and the fruits and income of such property. “ 2.
TAX DEDUCTION PROCESS (Old law and TRAIN): d. The result is the TAX PAYABLE.
1. Add all the estates from different countries to get the
TOTAL NET ESTATE.
2. TOTAL ESTATE minus FOREIGN TAXES PAID. ESTATE TAX TABLE (OLD LAW)
3. The result in No. 2 will be used to determine the
bracket. Over But not Tax is Plus Of the
4. Multiply No. 2 by the corresponding %. Result is the over excess
TAX PAYABLE. over
3. Under the TRAIN, the result in No. 2 will be multiplied by xx P200,000 Exempt xx xx
6%. The result is the TAX PAYABLE. P200,000 P500,000 0 5% P200,000
P500,000 P2,000,000 P15,000 8% P500,000
TAX CREDIT PROCESS UNDER THE OLD LAW: P2,000,000 P5,000,000 P135,000 11% P2,000,000
1. Add all the estates from different countries to get the P5,000,000 P10,000,000 P456,000 15% P5,000,000
TOTAL NET ESTATE. P10,000,000 And over P1,215,000 20% P10,000,000
2. Determine the bracket and determine the Philippine
Estate Tax.  This bracket is removed under the TRAIN LAW. Instead
3. If there is only one country: of a progressive rate, we already have a FIXED RATE
a. (Net Estate in Foreign Country / Entire net estate) x which is 6% on NET TAXABLE ESTATE.
Philippine Estate Tax.
b. Compare the result to the foreign estate tax paid.  How can the BIR recover unpaid tax liabilities?
c. Deduct to Philippine Estate Tax, whichever is lower.  TWO WAYS:
d. The result is the TAX PAYABLE. 1. It may recover from all the heirs who shall
share proportionately; or
4. If there are multiple countries - 2. It may go against the property held by an heir
FIRST LIMIT: if the same is sufficient to cover the whole tax
a. Do the same thing in 3a for each country. liability. The heir who paid can seek
b. Compare each result to the foreign estate tax paid reimbursement from his co-heirs.
in each country.
c. Choose that which is lower. Sec. 97, Par. B, OLD LAW Sec. 97, Par. B, TRAIN
d. Add the amounts chosen. The result is to be If a bank has knowledge of If a bank has knowledge of
compared to the amount in the second limit. the death of a person, who the death of a person, who
maintained a bank deposit maintained a bank deposit
SECOND LIMIT: account along, or jointly with account alone, or jointly with
a. (Total Foreign Estate / Entire net estate) x another, it shall not allow any another, it shall allow any
Philippine Estate Tax = Chorva. withdrawal from the said withdrawal from the said
b. Compare Chorva to the amount determined in the deposit account, unless the deposit account, subject to
first limit. Commissioner has certified a final withholding tax of
c. Determine which of them is lower and deduct it that the taxes imposed 6%.
from the Philippine estate tax as determined in No. thereon by this Title have For this purpose, all
2. been paid: Provided, withdrawal slips shall contain
d. The result is the TAX PAYABLE. however, That the a statement to the effect that
administrator of the estate or all of the joint depositors are
TAX CREDIT PROCESS UNDER THE TRAIN: any 1 of the heirs of the still living at the time of
1. Add all the estates from different countries to get the decedent may, upon withdrawal by any one of the
TOTAL NET ESTATE. authorization by the joint depositors and such
2. Multiply by 6% to determine Philippine Estate Tax. Commissioner, withdraw an statement shall be under oath
3. If there is only one country: amount not exceeding by the said depositors.
a. (Net Estate in Foreign Country / Entire net estate) x P20,000 without said
Philippine Estate Tax. certification. For this purpose,
b. Compare the result to the foreign estate tax paid. all withdrawal slips shall
c. Deduct to Philippine Estate Tax, whichever is lower. contain a statement to the
d. The result is the TAX PAYABLE. effect that all of the joint
depositors are still living at
4. If there are multiple countries - the time of withdrawal by any
FIRST LIMIT: one of the joint depositors
a. Do the same thing in 3a for each country. and such statement shall be
b. Compare each result to the foreign estate tax paid under oath by the said
in each country. depositors.
c. Choose that which is lower.
d. Add the amounts chosen. The result is to be
compared to the amount in the second limit.

SECOND LIMIT: DONOR’S TAX

a. (Total Foreign Estate / Entire net estate) x
UNDER THE OLD NIRC: considered as made for an adequate and full
consideration in money or money’s worth.
Exemptions of Gifts from Donor’s Tax: DNE
1. Dowries or donations made:
a. On account of marriage;
b. Before its celebration or within 1 year thereafter;
c. By the parents to each of their legitimate,
recognized or adopted children;
d. To the extent of the first P10,000.
2. Gifts made for the use of National government
3. Gifts in favor of Educational or charitable, religious, HOW IS DONOR’S TAX COMPUTED?
cultural or social welfare corporation, institution
accredited NGO, trust or philanthropic organization; I. If only one donation is made:
Provided, that not more than 30% of said gifts will be
used by such donee for administration purposes. Gross gifts made
Less: Deductions from gross gift
RATES OF TAX PAYABLE BY DONORS: Net gifts made
1. If the DONEE IS A STRANGER TO THE DONOR - tax Multiply by: Applicable tax rate
rate is 30% of the net gifts. Donor’s tax on the net gifts
2. If the DONEE IS NOT A STRANGER TO THE DONOR
- tax for each calendar year shall be computed on the II. If several gifts were made:
basis of the total net gifts made during the calendar year
in accordance with the schedule provided in Sec. 99(A), Gross gifts made (on date asked)
NIRC. Less: Deductions from gross gift
Net gifts made on this date
Who is a STRANGER? Add: All prior net gifts (C: share of spouse and exception)
 A person who is not a: Aggregate net gifts
1. Brother, sister (whole/half-blood), spouse, ancestor, Multiply by: Applicable tax rate
and lineal descendant; or Donor’s tax on aggregate net gifts
2. Relative by consanguinity in the collateral line within Less: Donor’s tax paid on prior net gifts
the 4th degree of relationship. Donor’s tax payable on the net gifts to date

Over But not Tax shall Plus Of the

over be excess of BUSINESS TAXES
xx P100,000 Exempt xx xx
P100,000 P200,000 0 2% P100,000
Kinds of Business Taxes:
P200,000 P500,000 P2,000 4% P200,000
1. Value-added tax
P500,000 P1,000,000 P14,000 6% P500,000
P1,000,000 P3,000,000 P44,000 8% P1,000,000
2. Percentage tax
P3,000,000 P5,000,000 P204,000 10% P3,000,000 3. Excise tax
P5,000,000 P10,000,000 P404,000 12% P5,000,000
P10,000,000 And over P1,004,000 15% P10,000,000

UNDER THE TRAIN LAW: VALUE-ADDED TAX

 The rate of tax is now fixed at 6% of the excess of Value-Added Tax - tax assessed, levied and collected on: IS
P250,000, during the calendar year, whether the donee a. Every Importation of goods, whether or not in the course
is a stranger or not. of trade or business; or
b. On each Sale, barter, exchange, or lease of goods or
 There is no more distinction as to the donee. properties, or on each rendition of services in the course
of trade or business.
 Donations on account of marriage has been removed. The tax is limited only to the value added to such goods,
properties or services by the seller, transferor or lessor.
 Gifts made during the calendar year shall be the basis of
determination of gifts subject to tax. Natures or Characteristics of VAT: P-BEIA
1. A PERCENTAGE TAX imposed at every stage of the
 Sec. 100, TRAIN. TRANSFER FOR LESS THAN distribution process on the sale, barter, exchange or
ADEQUATE AND FULL CONSIDERATION. lease of goods or properties and on the performance of
 Where property, other than real property, is services in the course of trade or business; or on the
transferred for less than an adequate and full importation of goods, whether for business or non-
consideration in money or money’s worth, then the business.
amount by which the fair market value of the 2. A BUSINESS TAX levied on certain transactions
property exceeded the value of the consideration involving a wide range of goods, properties and services,
shall, for the purpose of the tax imposed by this such tax being payable by the seller, lessor or transferor.
Chapter, be deemed a gift, and shall be included in 3. An EXCISE TAX or a tax on the privilege of engaging in
computing the amount of gifts made during the the business of selling goods or services, or in the
calendar year: Provided, however, that a sale , importation of goods.
exchange, or other transfer of property made 4. An INDIRECT TAX, the amount of which may be shifted
in the ORDINARY COURSE OF BUSINESS (a to or passed on the buyer, transferee, or lesee of the
transaction which is a bona fide, at arm’s length, goods, properties or services.
and free from any donative intent), will be 5. An AD VALOREM TAX, as its amount or rate is based
 on:
a. Gross selling price; or  CIR v. SEAGATE - Since the purchase of respondent are
b. Gross value in money; or not exempt from VAT, the rate to be applied is zero. Its
c. Gross receipts derived from the transaction. exemptions under both PD 66 and RA 7916 effectively
subjects such transactions to a zero-rate because the
ADVANTAGES OF VAT: RESH-G ecozone within which it is registered is managed
1. One of the Reform measures necessary to sustain and and operated by PEZA as a SEPARATE CUSTOMS
stabilize Philippine economic growth. TERRITORY. This means that such zone is created the
2. Promotes Efficient and simplified tax administration. legal fiction of foreign territory.
3. Simpler VAT system collection and monitoring.
4. Promotes Honesty in the payment of tax. Philippine Acetylene Co. v. CIR - The phrase “passed the
5. Generates the much-needed revenue to promote and tax on” is inaccurate, as obviously the tax is laid and remains
enhance government services. on the manufacturer and on him alone. The purchaser does
not really pay the tax. He pays or may pay the seller more for
INPUT TAX - the VAT paid by a VAT-registered person or the goods because of the seller’s obligation, but that is all.
entity in the course of his or its trade or business, on the  The price is the sum total paid for the goods. The
importation of goods or local purchases of goods or services, amount added because of the tax is paid to get the
from a VAT-registered person. goods and for nothing else. Therefore, it is part of the
price.
 To have an input tax, purchases must be made from a
VAT-registered taxpayer. TRANSACTIONS DEEMED SALE: TDCR
1. Transfer, use or consumption not in the course of
OUTPUT TAX - VAT due on the sale or lease of taxable business, of goods or properties originally intended for
goods, properties or services by a VAT-registered person. sale or for the use in the course of business.
2. Distribution or transfer to: sc
ZERO-RATED TRANSACTIONS - refer to the export sale of a. shareholders or investors as share in the profits of
goods and supply of services. The tax rate is set at zero. The the VAT-registered person; or
seller of such transactions charges no output tax, but can b. creditors in payment of debt.
claim a refund of or a tax credit certificate for the VAT 3. Consignment of goods if actual sale is not made within
previously charged by suppliers. 60 days following the date such goods were consigned.
4. Retirement from or cessation of business, with respect to
EFFECTIVELY ZERO-RATED TRANSACTIONS - sales of inventories of taxable goods existing as of such
goods or supply of services to persons or entities whose retirement or cessation.
exemption under special laws or international agreements to
which the Philippines is a signatory, effectively subjects such TRANSFER OF GOODS BY TAX EXEMPT PERSONS:
transactions to a zero rate. The seller who charges zero output  The purchasers, transferees or recipients shall be
tax on such transactions can also claim a refund of or a tax considered the importers thereof, who shall be liable for
credit certificate for the VAT previously charged by the any internal revenue tax on such importation.
supplier.  The tax due on such importation shall constitute a
lien on the goods superior to all charges or liens on
EXEMPT TRANSACTION - involves goods or services the goods, irrespective of the possessor thereof.
which, by their nature, are specifically listed in and expressly
exempted from VAT under the TAX Code, without regard to SOME EXEMPT TRANSACTIONS FROM VAT: SIS-SMS-
the tax status -- VAT-exempt or not -- of the party to the STELS
transaction. 1. Sale or importation of agricultural and marine food
 Such transaction is not subject to the VAT, but the seller products in their original state;
is not allowed any refund of or credit for any input 2. Importation of personal and household effects belonging
taxes paid. to residents of the Philippines returning from abroad;
3. Sale or importation of fertilizers, seeds or seedlings,
EXEMPT PARTY - a person or entity granted VAT fingerlings, fish, prawn, livestock or poultry feeds;
exemption under the TAX Code, special law or an international 4. Services subject to percentage tax;
agreement to which the Philippines is a signatory, and by 5. Medical, dental, hospital and veterinary services, except
virtue of which its taxable transactions become exempt from those rendered by professionals;
VAT. 6. Services rendered by regional or area headquarters
 Such party is also not subject to VAT, but he may be established in the Philippines;
allowed a tax refund of or credit for input taxes paid, 7. Transactions which are exempt under the international
depending on its registration as a VAT or non-VAT agreements to which the Philippines is a signatory;
taxpayer. 8. Export sales by persons who are not VAT-registered;
9. Lease of a residential unit with monthly rental not
DESTINATION PRINCIPLE - the destination of the goods exceeding P12,800;
determines the taxation or exemption from VAT. Goods or 10. Sales, importation or lease of passenger or cargo vessels
services are taxed only in the country where they are and aircraft.
consumed.

 CROSS-BORDER DOCTRINE - means that no VAT

shall be imposed to form part of the cost of goods
destined for consumption outside of the territorial border
of the taxing authority. Sales made by an enterprise
within a non-ecozone territory to an enterprise within an
ecozone territory shall be free from VAT.