TAX 2

VAT Chapter 1 (items 1-7)

Atty. Cardona
Louis Malaybalay

1. Value-added tax defined

• VAT – it is a tax on consumption levied on the sale, barter, exchange or lease of goods or
properties and services in the Philippines and on the importation of goods into the
Philippines.
• Input v. Output taxes – memaid: 264

2. Characteristics

a) Indirect tax

The amount of tax maybe shifted or passed on by the seller to the buyer, transferee or
lessee of goods, properties or services. It is paid by a person who is indirectly liable therefor,
and who may thereafter shift or pass on the tax to another person or entity, which ultimately
assumes the tax burden.

b) Tax on consumption
• (Broad-based) Every sale of goods, properties, or services at the levels of
manufacturers or producers and distributors is subject to VAT.
• It is a broad-based tax on consumption imposed on all stages of taxable sale but the
burden rests with the final consumer who consumed the goods, properties or
services in the Philippines.
• Space for addition
c) Percentage tax
• The tax is so-called VAT because it is imposed on the value not previously subjected
to the VAT.
• Value added – the difference between total sales of the taxpayer for the taxable quarter
subject to value-added tax and his total purchases for the same period subject also to
VAT.

3. VAT Principles

a) Destination Principle/ Cross Border Doctrine

• Goods and services are taxed only in the country where these are consumed. The
Cross Border Doctrine mandates that no VAT shall be imposed to form part of the cost of
the goods destined for consumption outside the territorial border of the taxing
authority.
• The same reason that exports are zero-rated because these shall be consumed
outside the Philippines, while imports are generally subject to 12% VAT because
they are for consumption within the Philippines.
 • In case of services, the consumption takes place where the service is performed
following the “situs of service principle.”
o Freeport zones and economic zones are considered as separate customs
territories. Sales by entities registered with these zones are either treated as
sales outside the country or domestic sales. If considered domestic sales,
these sales are importations in the hands of the purchaser and are subject to
the corresponding customs duties and other taxes on imported products.
• The VAT system generally follows the “destination principle” that exports are zero-
rated whereas imports are taxed. However, there is an exception in the form of
services performed in the Philippines for a recipient doing business outside the
Philippines (since the service is still done here)
b) VAT zero-rating
• Zero-rated transactions refer to the export sale of goods and supply of services.
The seller of such transactions charges no output tax but can claim a refund or a tax
certificate for the VAT previously charged by suppliers. This is for the benefit of the
seller.
• Purpose: To exempt the transaction completely from VAT previously collected since
input taxes passed to him may be recovered as refunds or credits.
• For goods, a rate of 0% of the gross selling price will be applied if:
o Export sale
o Sales to persons or entities whose exemption under special laws, or international
agreements to which the Philippines is a signatory. (Reciprocity)
• For services performed in the Philippines, a rate of 0% of the gross receipts will be
applied in the ff. instances:
o From processing, manufacturing or repacking of goods:
▪ For other persons doing business outside the Philippines
▪ The goods are subsequently exported
▪ The services are paid for in acceptable foreign currency and accounted
for in accordance with the rules and regulations of the BSP.
o Services other than processing, manufacturing or repacking of goods, rendered
to a:
▪ Person engaged in business conducted outside the Philippines or
▪ Nonresident person not engaged in business ho is outside the Philippines
when the services are performed
▪ The consideration is paid in acceptable foreign currency and accounted
for in accordance with the rules and regulations of the BSP
o Services rendered to persons or entities whose exemption under special laws or
international agreements to which the Philippines is a signatory effectively
subjects such services to zero rate
o Services rendered to persons engaged in international shipping or international
air transport operations, including leases of property for use thereof, as long as
the services shall be exclusively for international shipping or air transport
operations.
o Services performed by subcontractors and/or contractors in processing,
converting, or manufacturing goods for an enterprise whose export sales exceed
70% of total annual production.
 o Transport of passengers and cargo by domestic air and sea vessels from the
Philippines to a foreign country
o Sale of power or fuel generated through renewable sources of energy
c) Effectively zero-rating
• Refers to the local sale of goods, properties and services by a VAT-registered
person to an entity that was granted indirect tax exemption under special laws or
international agreements. Since the buyer is exempt from indirect tax, the seller cannot
pass on the VAT and therefore the exemption enjoyed by the buyer shall extend to
the seller, making the sale effectively zero-rated.
• Effectively Zero-rated transactions refer to the sale of goods or supply of services to
persons or entities whose exemption under special laws or international
agreements to which the Philippines is a signatory effectively subjects such transactions
to a zero rate. Such rate does not yield any tax chargeable against the
purchaser. This is for the benefit of the purchaser.
• Strictly speaking, it is the sales by the suppliers which are zero-rated. But the entities are
granted an indirect tax exemption for policy and economic reasons.
• In both zero-rated and effectively zero-rated transactions, the seller who charges zero
output tax can claim a refund or a tax credit certificate for the VAT previously
charged by suppliers.

Automatically Zero-Rated Sale Effectively Zero-Rated Sale

As to Nature
Refers to export sale of goods, properties and Refers to local sale of goods, properties and
supply of services by a VAT-registered person. supply of services by a VAT-registered person to a
person or entity who was granted indirect tax
exemption under special laws or international
agreements.
As to for Whose Benefit it is Intended
Primarily intended to be enjoyed by the seller who Intended to benefit the purchaser who, not being
is directly and legally liable for the VAT, making directly and legally liable for the payment of the
such seller internationally competitive by allowing VAT, will ultimately bear the burden of the tax
the refund or credit of input taxes that are shifted by the suppliers.
attributable to export sales.

4. Liability for VAT

a) Transactions subject to VAT

• (Ingles) How do we know if the transaction is subject to VAT? What are the elements?
1. It must be done in the ordinary course of trade or business
2. There must be a sale, barter, exchange, leas of goods or properties, or rendering
of service in the Philippines
3. It is not VAT-exempt, or VAT zero-rated.
• If all three are present, then the transaction is subject to 12% VAT. Absence of one will
not make the transaction subject to VAT.
• But remember that importations are subject to VAT, whether or not in the course of
trade or business.
b) Meaning of “in the course of trade or business”
• Sec 105. - The phrase “in the course of trade or business” means the regular conduct or
pursuit of a commercial or an economic activity, including transactions incidental thereto,
by any person regardless of whether or not the person regardless of whether or not the
person engaged therein is a nonstock, nonprofit private organization (irrespective of the
disposition of its net income and whether or not it sells exclusively to members or their
gests) or government entity.
• [Requisites]: A transaction will be characterized as having been entered into by a
person in the course of trade or business if it is:
o Regularly conducted
o Undertaken in pursuit of a commercial or economic activity
• Regular – involves more then one isolated transaction. It requires repetition and
continuity of action
o Isolated Transaction – is generally not in the ordinary course of trade or
business, hence, not subject to business tax.
• Incidental – means depending upon or appertaining to something else primary;
something necessary, appertaining to, or depending upon another, which is termed the
principal, something incidental to the main purpose.
o [Services made by nonresidents are always considered/presumed as
having been made in the ordinary course of business ]: The rule of
regularity, to the contrary notwithstanding, services rendered in the
Philippines by nonresident foreign persons shall be considered as being
course of trade or business.
• “Ordinary course of trade or business” means the regular conduct or pursuit of a
commercial or an economic activity.
o It also includes incidental transactions thereto
o It covers any person regardless or whether or not the person engaged therein
is a nonstock, nonprofit organization (irrespective of the disposition of its net
income and whether or not it sells exclusively to members or their guests), or a
government entity.
• (Requisites) There should be:
o A commercial/economic activity
o Regularity in the action
▪ Regular involves more than one isolated transaction. It requires
repetition and continuity of action.
▪ When determining if this element/requisite exists, be mindful of the
following:
• Was the transaction done regularly? Or isolated?
• Was it incidental to the taxpayer’s business?
• Is the taxpayer a nonresident alien? Because if he is, the
transaction does not need to be regular.
▪ [Exception] to the regularity requirement:
• If the taxpayer is a nonresident foreign person, there is no
need for the regularity of conduct. Services rendered by them in
the Philippines are considered as being in the course of
trade or business, and thus, subject to the VAT.
 • Importation is always subject to VAT regardless of whether or
not it is in the course of trade or business.
• Any sale, barter, or exchange of goods or services in the course of trade or business is
subject to VAT
• Space for additional info

5. Kinds of VAT

a) VAT on sale, barter or exchange of goods or properties

• All tangible and intangible objects which are capable of pecuniary estimation shall
include, among others:
o Real properties held primarily for sale to customers or held for lease in the
ordinary course of trade or business
o The right or privilege to use patent, copyright, design or model, plan, secret
formula, or process, goodwill, trademark, trade brand or scientific equipment
o The right or privilege to use in the Philippines oof any industrial, commercial, or
scientific equipment.
o The right or privilege to use motion picture films, tapes, and discs
o Radio, television, satellite transmission and cable television time
• [Requisites] for taxability of sale of goods and personal properties
o The goods or properties are for the use or consumption within the
Philippines
o There is an actual or deemed sale, barter or exchange of goods or personal
properties for a valuable consideration.
o The sale is not exempt from VAT, special law, or international agreement
o The sale is in the course of trade or business in the Philippines.
• Any additional info here
b) VAT on importation of goods
• The importation of goods herein contemplated refers to importation by any person
who may or may not be engaged in trade or business in the Philippines
• Importation begins when the carrying vessel or aircraft enters the jurisdiction of the
Philippines with the intention to unload therein, it is terminated upon payment of duties,
taxes, and other charges due upon the articles, or secured be paid, at a port of entry and
the legal permit for withdrawal shall have been granted.
• Any additional info here
c) VAT on sale of services and use or lease of properties
• Sale or exchange of services: The performance of all kinds of services in the Philippines
for others for a fee, remuneration or consideration whether in kind or in cash.
• Lease of properties: all forms of property for lease, whether real or personal, are liable
to VAT except when the gross annual sales do not exceed the threshold. It shall be
subject to VAT irrespective of the place where the contract or lease or licensing
agreement was executed if the property is leased or used in the Philippines.
• [Requisites] for taxability:
o There is a sale or exchange of service or lease, or use of property enumerated
in the law or use of property enumerated in the law or other similar services
o The service is performed or to be performed in the Philippines, and in case
of lease, property leased or used must be located in the Philippines
 o The service in the course of the taxpayer’s trade or business or profession
(except in the case of services done in the Philippines done by a non-resident
person)
o The service is for a valuable consideration actually or constructively received
o The service is not exempt under the NIRC, special law or international
agreement.
• Space for additional info

6. VAT on sale, barter or exchange of goods or properties

a. Rate and tax base

• Twelve percent (12%) of the gross selling price or gross value in money of the goods
or properties sold, bartered or exchanged. Such tax is to be paid by the seller or
transferor.
o Gross selling price for goods or properties other than real property –
the total amount of money or its equivalent which the purchaser pays or is
obligated to pay to the seller in consideration of the sale, barter or exchange of
the goods properties, excluding VAT, the excise tax, if any, on such goods or
properties shall form part of the gross selling price.
▪ Allowable deductions from gross selling price (memaid)
• Sales discount – determined and granted at the time of the
sale as expressly indicated in the invoice.
o Discounts conditioned upon the subsequent happening
of an event or fulfillment of certain conditions shall not
be allowed as deductions.
• Sales returns and allowances
o Sales returns – arise when customers return all or a
portion of the goods that they purchased due to wrong
specifications, poor quality of the merchandise, or if
erroneous merchandise was delivered
o Sales allowances – arise when the customer is willing
to accept the goods despite certain defects in exchange
for a price adjustment or an “allowance” granted by the
seller.
o Additional info space
• Transactions include barters, exchanges and leases of goods or properties.

b. Meaning of “goods or properties”

• All tangible and intangible objects which are capable of pecuniary estimation shall
include, among others:
o Real properties held primarily for sale to customers or held for lease in the
ordinary course of trade or business
o The right or privilege to use patent, copyright, design or model, plan, secret
formula, or process, goodwill, trademark, trade brand or scientific equipment
o The right or privilege to use in the Philippines oof any industrial, commercial, or
scientific equipment.
o The right or privilege to use motion picture films, tapes, and discs
 o Radio, television, satellite transmission and cable television time
• Requisites for taxability of sale of goods and personal properties
o The goods or properties are for the use or consumption within the
Philippines
o There is an actual or deemed sale, barter or exchange of goods or personal
properties for a valuable consideration.
o The sale is not exempt from VAT, special law, or international agreement
o The sale is in the course of trade or business in the Philippines.
• Any additional info here

c. Transactions subject to VAT Zero-Rating

i. Export sales (memaid: 252)

• Sale 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 goods 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 BSP.
o Sale of raw materials or packaging materials to a nonresident buyer for
delivery to resident local export-oriented enterprise to be used in
manufacturing, processing, packing, or repacking in the Philippines of
the said buyer’s goods, which must be paid for in acceptable foreign
currency and accounted for in accordance with the rules and regulations
of BSP.
o Sale of Raw materials or packaging materials to an export-oriented
enterprise.
▪ Export Oriented Enterprise – any enterprise whose export
sales exceed 70% of the total annual production.
o Transactions “considered export sales under E.O. no. 226” (Omnibus
Investment Code of 1987) and other special laws
o Sale of goods, supplies, equipment and fuel to persons engaged in
international shipping or international air transport operations.
• Sales to persons or entities deemed tax-exempt under special law or
international agreement
o The ff. sales to enterprises duly registered and accredited with the
following shall be effectively subject to zero rate
▪ SBMA – Subic Bay Metropolitan Authority
▪ PEZA – Philippine Economic Zone Authority
▪ ADB – Asian Development Bank
▪ IRRI – International Rice Research Institute

ii. Foreign currency denominated sale

• Export sale:
o The sale 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
 goods so exported and 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 BSP.
o Sale of taw materials or packaging materials to a nonresident 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 and paid for in acceptable foreign currency and
accounted for in accordance with the rules and regulations of the BSP.
• The ff. services performed in the PH by VAT registered persons shall be subject
to zero percent rate:
o Processing, manufacturing or repacking goods for other persons doing
business outside the Philippines which are subsequently exported, where
the services are paid for in acceptable foreign currency and accounted
for in accordance the rules and regulations of the BSP.
o Services other than those mentioned in the preceding paragraph,
rendered to a person engaged in business conducted outside the
Philippines or to a nonresident 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.

iii. Transaction covered by reciprocity rule

• Transactions of a VAT-registered person with the embassy of a foreign
state and its personnel will be zero-rated, provided that they can submit to
the commissioner a copy of the special legislation or international agreement
showing that said foreign government allows similar tax exemption privilege to
the Philippine embassy and its personnel, it is however limited to sales made to
the embassies in their official capacities and does not apply to the individual
purchases made by the members of their diplomatic staff.
• 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 (0%) rate.

d. Transactions deemed sale (memaid: 250)

1. Transfer, use, consumption of goods or properties not in the course of business of
goods or properties originally intended for sale or for use in the course of business (i.e. when
a VAT-registered person withdraws goods from his business for his personal use)
2. Distribution or transfer to:
a. Shareholders or investors as share in the profits of a VAT registered person
(property dividends)
b. Creditors in payment of debt or obligations
3. Consignment of goods if actual sale is not made within 60 days following the date such
goods were consigned
4. Retirement from or Cessation of business with respect to all goods on hand, whether
capital goods on hand, whether capital goods, stock-in trade, suppliers or materials as of the
date of such retirement or cessation.
 o Change of ownership of a business when:
▪ Single proprietorship incorporates
▪ Proprietor of single proprietorship sells his business
o Dissolution of a partnership and creation of a new partnership which takes
over the business.

7. VAT on importation of goods

a. Rate and tax base

• Twelve percent (12%) based on:
o Total value used by the BOC in determining tariff and customs duties, plus
customs duties, excise taxes, if any, and other charges, such tax to be paid by
the importer prior to the release of goods from the customs .
o Landed cost in case the valuation used by the BOC is based on volume and
quantity. Landed cost consists of the invoice amount, customs duties, freight,
insurance and other charges and also excise tac, if any.
▪ The same rule applies to technical importation of goods sold by a
person located in a special economic zone to a customer located in a
customs territory.
b. Importation, defined
• When goods are imported from a foreign country to the Philippines
• Importation begins when the carrying vessel or aircraft enters the jurisdiction of the
Philippines with the intention to unload therein, it is terminated upon payment of duties,
taxes, and other charges due upon the articles, or secured be paid, at a port of entry and
the legal permit for withdrawal shall have been granted.
• Importer – refers to any person who brings goods into the Philippines, heather or not
made in the course of his trade or business. It includes non-exempt persons or entities
who acquire tax-free imported goods from exempt persons entities or agencies.
• Additional info here
c. Transfer of goods by tax-exempt persons
• Sale, transfer or exchange of imported goods by tax exempt persons (Technical
importation)
• In the case of goods imported into the Philippines by VAT-exempt persons, entities or
agencies which are subsequently sold, transferred or exchanged in the Philippines to
non-exempt persons or entities, the latter shall be considered the importers thereof, who
shall be liable for the VAT due on such importation.
• When and by whom paid: The VAT on importation shall be paid by the importer prior to
the release of such goods from customs custody.
o Person liable to VAT on importation: the seller is the statutorily taxpayer of VAT.
The seller is the one liable to declare and pay the VAT to the BIR. As an
exception, the importer who is actually the buyer of goods is the one liable
to pay VAT. (Technical importation)
• Space for additional info

8. VAT on sale of services and use or lease of properties

Sale/Exchange of Services - The performance of all kinds of services in the Philippines for others for a
fee, remuneration or consideration whether in kind or in cash.

Lease of Properties – All forms of property for lease, whether real or personal, are liable to VAT except
when the gross annual sales do not exceed the threshold. It shall be subject to VAT irrespective of the
place where the contract or lease or licensing agreement was executed if the property is leased or used
in the Philippines

Requisites for Taxability

1. There is a sale or exchange of service or lease, or use of property enumerated in the law or
other similar services.

2. The service is performed or to be performed in the Philippines, and in the case of lease, property
in leased must be located in the Philippines. (Place where the contract is entered into or executed
is irrelevant)

3. The service is in the course of the taxpayer’s trade or business or profession (except in the case
of services done in the Philippines done by a non-resident person)

4. The service is for a valuable consideration actually or constructively received

5. The service is not exempt under the NIRC, special law or international agreement

A. Rate and base

Twelve percent of the gross receipts derived from the sale or exchange of services, including the use
or lease or properties.

Gross receipts – total amount of money or its equivalent actually or constructively received during the
taxable period for the services performed or to be performed for another person, excluding VAT
representing:

i. Payments on the contract price, compensation, service fee, rental or royalty

ii. The amount charged for materials supplied with the services.

iii. Deposits applied as payments for services rendered and advance payments

b. Except:

i. Those amounts earmarked for payment to unrelated third party; or

ii. Amounts received as reimbursement for advanced payment on behalf of another

which do not redound to the benefit to the payor

Constructive Receipts – Occurs when the money consideration or its equivalent is placed at the control
of the person who rendered the service without restrictions by the payor. (Ex. Deposit in banks made
available to seller of services or set-off of seller or services’ debt with the consent of the latter as
payment for services rendered to the former)
Amounts are constructively received when:

1. Credited to the taxpayer’s account

2. Set apart for the taxpayer

3. Otherwise made available so that the taxpayer may draw upon it

anytime or draw upon it when notice of intention to withdraw has been
given.

• Actual or constructive receipt of the contract price, compensation, remuneration

or fee makes the seller of service liable to VAT, even if the service is yet to
be performed by him.

SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. -

(A) Rate and Base of Tax. - There shall be levied, assessed and collected, a value-added tax
equivalent to twelve percent (12%)[91] of gross receipts derived from the sale or exchange of services,
including the use or lease of properties.

The phrase “sale or exchange of services” means the performance of all kinds of services in the
Philippines for others for a fee, remuneration or consideration, including those performed or rendered by
construction and service contractors; stock, real estate, commercial, customs and
immigration brokers; lessors of property, whether personal or real; warehousing services; lessors or
distributors of cinematographic films; persons engaged in milling processing, manufacturing or
repacking goods for others; proprietors, operators or keepers of hotels, motels, rest houses,
pension houses, inns, resorts; proprietors or operators of restaurants, refreshment parlors, cafes and
other eating places, including clubs and caterers; dealers in securities; lending investors;
transportation contractors on their transport of goods or cargoes, including persons who
transport goods or cargoes for hire another domestic common carriers by land relative to their
transport of goods or cargoes; 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; sales of electricity by generation companies, transmission by any means entity[92], and
distribution companies, including electric cooperatives;[92] services of franchise grantees of
electric utilities. telephone and telegraph, radio and television broadcasting and all other
franchise grantees except those under section 119 of this Code, and non-life insurance companies
(except their crop insurances), including surety, fidelity, indemnity, and bonding companies; and
similar services regardless of whether or not the performance thereof calls for the exercise or use of
the physical or mental faculties. The phrase “sale or exchange of services” shall likewise include:

(1) The lease or the use of or the right or privilege to use any copyright, patent, design or model,
plan secret formula or process, goodwill, trademark, trade brand or other like property or right;

(2) The lease of the use of, or the right to use of any industrial, commercial or scientific equipment;

(3) The supply of scientific, technical, industrial or commercial knowledge or information;

(4) The supply of any assistance that is ancillary and subsidiary to and is furnished as a means of
enabling the application or enjoyment of any such property, or right as is mentioned in
subparagraph (2) or any such knowledge or information as is mentioned in subparagraph (3);
(5) The supply of services by a nonresident person or his employee in connection with the use of
property or rights belonging to, or the installation or operation of any brand, machinery or other
apparatus purchased from such nonresident person.

(6) The supply of technical advice, assistance or services rendered in connection with technical
management or administration of any scientific, industrial or commercial undertaking, venture,
project or scheme;

(7) The lease of motion picture films, films, tapes and discs; and

(8) The lease or the use of or the right to use radio, television, satellite transmission and cable
television time.

Lease of properties shall be subject to the tax herein imposed irrespective of the place where the
contract of lease or licensing agreement was executed if the property is leased or used in the
Philippines.

The term “gross receipts” means the total amount of money or its equivalent representing
the contract price, compensation, service fee, rental or royalty, including the amount
charged for materials supplied with the services and deposits and advanced payments
actually or constructively received during the taxable quarter for the services performed or
to be performed for another person, excluding value-added tax. [4]

(B) Transactions Subject to Zero Percent (0%) Rate - The following services performed in the
Philippines by VAT- registered persons shall be subject to zero percent (0%) rate.

(1) 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 Bangko Sentral
ng Pilipinas (BSP); Commented [LM1]: Services for persons doing business
outside ph, goods are subsequently exported, paid in for
(2) Services other than those mentioned in the preceding paragraph, rendered to a person engaged in acceptable foreign currency
business conducted outside the Philippines or to a nonresident 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
Bangko Sentral ng Pilipinas (BSP);

(3) 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 (0%) rate; Commented [LM2]: Effectively zero rated transactions

(4) Services rendered to persons engaged in international shipping or international air transport
operations, including leases of property for use thereof: Provided, That these services shall be
exclusive for international shipping or air transport operations; [92]

(5) Services performed by subcontractors and/or contractors in processing, converting, or manufacturing

goods for an enterprise whose export sales exceed seventy percent (70%) of total annual production; Commented [LM3]: Sales to export oriented enterprises

[92]
(6) Transport of passengers and cargo by domestic air or sea vessels from the Philippines to a foreign
country; and Commented [LM4]: International transportation
(7) Sale of power or fuel generated through renewable sources of energy such as, but not
limited to, biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging energy
sources using technologies such as fuel cells and hydrogen fuels.

[93]
(8) VETOED BY THE PRESIDENT

(9) Services rendered to offshore gaming licensees subject to gaming tax under Section 125-A of Commented [LM5]: Services in favor of licensees of
this Code by service providers, including accredited service providers as defined in Section 27 (G) of this offshore faming operations subject to gaming tax
Code.[20]

SEC. 109. Exempt Transactions. –

(1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from
the value-added tax.

(A) Sale or importation of agricultural and marine food products in their original state, livestock
and poultry of or king generally used as, or yielding or producing foods for human consumption; and
breeding stock and genetic materials therefor. Commented [LM6]: Sale of raw agricultural/marine food
products
Products classified under this paragraph shall be considered in their original state even if they
have undergone the simple processes of preparation or preservation for the market,
such as freezing, drying, salting, broiling, roasting, smoking or stripping. Polished and/or husked
rice, corn grits, raw cane sugar and molasses, ordinary salt and copra shall be considered in their
original state; [94]

(B) Sale or importation of fertilizers; seeds, seedlings and fingerlings; fish, prawn, livestock and
poultry feeds, including ingredients, whether 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); Commented [LM7]: Fertilizers, ingredients, feeds,
ingredients, panabong, dog food
(C) Importation of personal and household effects belonging to the residents of the Philippines
returning from abroad and nonresident citizens coming to resettle in the Philippines:
Provided, That such goods are exempt from customs duties under the Tariff and Customs Code of the
Philippines; Commented [LM8]: Balikbayan boxes

(D) Importation of professional instruments and implements, tools of trade, occupation or

employment, [95] wearing apparel, domestic animals, and personal and household effects
belonging to persons coming to settle in the Philippines or Filipinos or their families and
descendants who are now residents or citizens of other countries, such parties hereinafter
referred to as overseas Filipinos, in quantities and of the class suitable to the profession, rank or
position of the persons importing said items, [95] for their own use and not for barter or sale, Commented [LM9]: As long as fr their own use and not in
accompanying such persons, or arriving within a reasonable time: [96] Provided, That the Bureau of pursuit of an economic or commercial activity
Customs may, upon the production of satisfactory evidence that such persons are actually
coming to settle in the Philippines and the goods are brought from their former place of abode,
exempt such goods from payment of duties and taxes:[97] Provided, further, That the vehicles, vessels,
aircrafts, machineries and other similar goods for use in manufacture,[97] shall not fall within this
classification and shall therefore be subject to duties, taxes and other charges;
(E) Services subject to percentage tax under Title V; Commented [LM10]: Those subject to percentage tax
Commented [LM11R10]: Services daw
(F) Services by agricultural contract growers and milling for others of palay into rice, corn into
grits and sugar cane into raw sugar; Commented [LM12]: Growing and milling contracts
involving rice, corn, sugar
(G) Medical, dental, hospital and veterinary services except those rendered by professionals; Commented [LM13]: Services rendered by professionals
is subject to VAT
(H) Educational services rendered by private educational institutions, duly accredited by the
Department of Education(DepED), the Commission on Higher Education (CHED), the Technical
Education and Skills Development Authority (TESDA) and those rendered by government educational
institutions; [55] Commented [LM14]: Educational services in general

(I) Services rendered by individuals pursuant to an employer-employee relationship; Commented [LM15]: Not subject to VAT because subject
to INCOME TAX
(J) 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; Commented [LM16]: Headquarters of multinational
corporations provided that they do not derive income in the
(K) Transactions which are exempt under international agreements to which the Philippines is a Philippines
signatory or under special laws, except those under Presidential Decree No. 529; [55] Commented [LM17]: reciprocity
Commented [LM18R17]: Pd. 529: PRESIDENTIAL DECREE
(L) Sales by agricultural cooperatives duly registered with the Cooperative Development
No. 529 August 6, 1974
Authority to their members as well as sale of their produce, whether in its original state or GRANTING TO PETROLEUM EXPLORATION
processed form, to non-members; their importation of direct farm inputs, machineries and equipment, CONCESSIONAIRES UNDER THE PETROLEUM ACT OF 1949
including spare parts thereof, to be used directly and exclusively in the production and/or processing EXEMPTION FROM CUSTOMS DUTY AND COMPENSATING
of their produce; TAX ON IMPORTATIONS OF MACHINERY AND EQUIPMENT,
SPARE PARTS AND MATERIALS REQUIRED FOR THEIR
(M) Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered with the EXPLORATION OPERATIONS
Cooperative Development Authority;

(N) Sales by non-agricultural, non- electric and non-credit cooperatives duly registered with the Commented [LM19]: Sales by agricultural cooperatives
Cooperative Development Authority: Provided, That the share capital contribution of each member Commented [LM20]: Lending activities by cooperatives
does not exceed Fifteen thousand pesos (P15,000) and regardless of the aggregate capital and net registered with the cooperative development authority
surplus ratably distributed among the members;
Commented [LM21]: Sales by cooperatives registered
with the cooperative development authority
(O) Export sales by persons who are not VAT-registered;
Commented [LM22]: Exports made by non vat registered
(P) Sale of real properties not primarily held for sale to customers or held for lease in the peeps
ordinary course of trade or business or real property utilized for low-cost and socialized
housing as defined by Republic Act No. 7279, otherwise known as the Urban Development and Housing
Act of 1992, and other related laws, residential lot valued at One million pesos (P1,500,000) and
below, house and lot, and other residential dwellings valued at Two million five hundred thousand
pesos (P2,500,000) and below: Provided, That beginning January 1, 2021, the VAT exemption shall
only apply to sale 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 property utilized for socialized housing as
defined by Republic Act No. 7279, sale of house and lot, and other residential dwellings with the selling
price of not more than Two million pesos (P2,000,000): [95] Provided, further, That every three (3)
years thereafter, the amount herein stated shall be adjusted to its present value using the Consumer
Price Index, as published by the Philippine Statistics Authority (PSA); [98] [99]
 [100]
(Q) Lease of a residential unit with a monthly rental not exceeding Fifteen thousand pesos (₱15,000); Commented [LM23]: Renta na hindi sosobra sa 15k petot

(R) Sale, importation, printing or publication of books, and any newspaper, magazine, journal,
review bulletin, or any such educational reading material covered by the UNESCO Agreement on
the Importation of Educational, Scientific and Cultural Materials, including the digital or electronic
format thereof: Provided, That the materials enumerated herein are not devoted principally to the
publication of paid advertisements; Commented [LM24]: Vat exempt: sale tsaka importation
ng libro as long as walang paid advertisements
s(S) Transport of passengers by international carriers;[95] Commented [LM25]: Ex. International carrier; emirates
dubai
(T) Sale, importation or lease of passenger or cargo vessels and aircraft, including engine,
equipment and spare parts thereof for domestic or international transport operations; Commented [LM26]: Transactions involving
passenger/cargo vessels and aircraft
(U) Importation of fuel, goods and supplies by persons engaged in international shipping or air
transport operations: Provided, That the fuel, goods, and supplies shall be used for international
shipping or air transport operations; [95] Commented [LM27]: Importations made by those who
are engaged in international shipping or air transport
(V) Services of bank, non-bank financial intermediaries performing quasi-banking functions, and other operations
non-bank financial intermediaries; Commented [LM28]: Services by bank. Quasi bank and
non bank financial intermediaries (g-cash)
(W) Sale or lease of goods and services to senior citizens and persons with disability, as provided under
Commented [LM29]: Vat exempt: sales to senior citizens
Republic Act Nos. 9994 (Expanded Senior Citizens Act of 2010) and 10754 (An Act Expanding the Benefits
and pwd's
and Privileges of Persons With Disability), respectively; [95]

[95]
(X) Transfer of property pursuant to Section 40(C)(2) of the NIRC, as amended; Commented [LM30]: In general, there are two kinds of
tax-free exchange: (1) transfer to a controlled corporation;
(Y) Associations dues, membership fees, and other assessments and charges collected by and, (2) merger or consolidation.
homeowners’ associations and condominium corporations; [95] Commented [LM31]: Cat exempt: mga multa ng
subdivision
(Z) Sale of gold to the Banko Sentral ng Pilipinas (BSP);[101]

[102]
(AA) Sale of or importation of prescription drugs and medicines for:

[103]
(i) Diabetes, high cholesterol, and hypertension beginning January 1, 2020; and

(ii) Cancer, mental illness, tuberculosis, and kidney diseases beginning January 1,
2021. [104]

Provided, That the DOH shall issue a list of approved drugs and medicines for this purpose within
sixty (60) days from the effectivity of this Act; and [105]

[106]
(BB) Sale or importation of the following beginning January 1, 2021 to December 31, 2023:

(i) Capital equipment, its spare parts and raw materials, necessary for the production of
personal protective equipment components such as coveralls, gown, surgical cap, surgical
mask, N-95 mask, scrub suits, goggles and face shield, double or surgical gloves, dedicated
shoes, and shoe covers, for COVID-19 prevention; and [106] Commented [LM32]: Sale/importation ng mga PPE

(ii) All drugs, vaccines and medical devices specifically prescribed and directly used for the
treatment of COVID-19; and [106] Commented [LM33]: Drugs and devices used for
treatment of COVID
 (iii) Drugs for the treatment of COVID-19 approved by the Food and Drug Administration Commented [LM34]: Drugs for treatment of COVID
(FDA) for use in clinical trials, including raw materials directly necessary for the production of
such drugs: Provided, That the Department of Trade and Industry (DTI) shall certify that such
equipment, spare parts or raw materials for importation are not locally available or insufficient in
quantity, or not in accordance with the quality or specification required: Provided, further, That
for item (ii), within sixty (60) days from the effectivity of this Act, and every three (3) months
thereafter, the Department of Health (DOH) shall issue a list of prescription drugs and medical
devices covered by this provision: Provided, finally, That the exemption claimed under this
subsection shall be subject to post audit by the Bureau of Internal Revenue or the Bureau of
Customs as may be applicable. [106]

(CC) 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 Three million pesos (P3,000,000.00). [107] Commented [LM35]: Sales/services by persons whose
gross annual sales/ receipts do not exceed the amount of 3
million pesos

SEC. 110. Tax Credits. -

A. Creditable Input Tax. –

(1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113
hereof on the following transactions shall be creditable against the output tax:

(a) Purchase or importation of goods:

(i) For sale; or

(ii) For conversion into or intended to form part of a finished product for sale including
packaging materials; or

(iii) For use as supplies in the course of business; or

(iv) For use as materials supplied in the sale of service; or

(v) For use in trade or business for which deduction for depreciation or
amortization is allowed under this Code. [19]

(b) Purchase of services on which a value-added tax has been actually paid. Commented [LM36]: Services where VAT has been
actually paid
(2) The input tax on domestic purchase or importation of goods or properties by a VAT-
registered person [8] shall be creditable:

(a) To the purchaser upon consummation of sale and on importation of goods or properties;
and

(b) To the importer upon payment of the value-added tax prior to the release of the goods
from the custody of the Bureau of Customs.
Provided, that the input tax on goods purchased or imported in a calendar month for use in trade or
business for which deduction for depreciation is allowed under this Code shall be spread evenly over
the a month of acquisition and the fifty-nine (59) succeeding months if the aggregate
acquisition cost for such goods, excluding the VAT component thereof, exceeds One million pesos
(P1,000,000): Provided, however, That if the estimated useful life of the capital good is less than
five (5) years, as used for depreciation purposes, then the input VAT shall be spread over such a
shorter period: Provided, further, That the amortization of the input VAT shall only be allowed until
December 31, 2021 after which taxpayers with unutilized input VAT on capital goods purchased or
imported shall be allowed to apply the same as scheduled until fully utilized: [108]

Provided, finally, That in the case of purchase of services, lease or use of properties, the input tax
shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental,
royalty or free.

(3) A VAT-registered person who is also engaged in transactions not subject to the value-
added tax shall be allowed tax credit as follows:

(a) Total input tax which can be directly attributed to transactions subject to value-added
tax; and

(b) A ratable portion of any input tax which cannot be directly attributed to either
activity.

The term “input tax” means the value-added tax due from or paid by a VAT-registered person in the
course of his trade or business on importation of goods or local purchase of goods or services, including
lease or use of property, from a VAT-registered person. It shall also include the transitional input tax
determined in accordance with Section 111 of this Code.

The term “output tax” means the value-added tax due on the sale or lease of taxable goods or
properties or services by any person registered or required to register under Section 236 of this Code.

(B) Excess Output or Input Tax. - If at the end of any taxable quarter the output tax exceeds the
input tax, the excess shall be paid by the Vat-registered person. If the input tax exceeds the
output tax, the excess shall be carried over to the succeeding quarter or quarters. Provided, however,
That any input tax attributable to zero-rated sales by a VAT-registered person may at his option be
refunded or credited against other internal revenue taxes, subject to the provisions of Section 112. Commented [LM37]: Excess output tax - shall be paid
Excess input tax- carried over to the succeeding quarter
(C) Determination of Creditable Input Tax. - The sum of the excess input tax carried over
from the preceding month or quarter and the input tax creditable to a VAT-registered person during the Input tax to zero-rated sales by vat registered person may
taxable month or quarter shall be reduced by the amount of claim for refund or tax credit for be refunded or credited against other taxes
value-added tax and other adjustments, such as purchase returns or allowances and input tax
attributable to exempt sale.

The claim for tax credit referred to in the foregoing paragraph shall include not only those filed with the
Bureau of Internal Revenue but also those filed with other government agencies, such as the Board of
Investments and the Bureau of Customs.

SEC. 111. Transitional/Presumptive Input Tax Credits. –

(A) Transitional Input Tax Credits. - A person who becomes liable to value-added tax or any person
who elects to be a VAT-registered person shall, subject to the filing of an inventory according to rules and
regulations prescribed by the Secretary of finance, upon recommendation of the Commissioner, be
allowed input tax on his beginning inventory of goods, materials and supplies equivalent to
two percent (2%) of the value of such inventory or the actual value-added tax paid on such
goods, materials and supplies, whichever is higher, which shall be creditable against the
output tax.

(B) Presumptive Input Tax Credits. - Persons or firms engaged in the processing of sardines,
mackerel and milk, and in manufacturing refined sugar and cooking oil, shall be allowed a presumptive
input tax, creditable against the output tax, equivalent to four percent (4%) of the gross
value in money of their purchases of primary agricultural products which are used as inputs to
their production.

As used in this Subsection, the term 'processing' shall mean pasteurization, canning and activities
which through physical or chemical process alter the exterior texture or form or inner substance of a
product in such manner as to prepare it for special use to which it could not have been put in its original
form or condition.

SEC. 112. Refunds or Tax Credits of Input Tax . -

(A) Zero-rated or Effectively Zero-rated Sales. - Any VAT-registered person, whose sales are zero-
rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when
the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input
tax due or paid attributable to such sales, except transitional input tax, to the extent that such input
tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales
under Section 106(A)(2)(a)(1), (2) and (b) and Section 108 (B)(1) and (2), the acceptable foreign
currency exchange proceeds thereof had been duly accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is
engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of
properties or services, and the amount of creditable input tax due or paid cannot be directly and
entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis
of the volume of sales. Provided, finally, That for a person making sales that are zero-rated under Section
108(B) (6), the input taxes shall be allocated ratably between his zero-rated and non-zero-
rated sales.

(B) Cancellation of VAT Registration. - A person whose registration has been cancelled due to
retirement from or cessation of business, or due to changes in or cessation of status under Section
106(C) of this Code may, within two (2) years from the date of cancellation, apply for the issuance of a
tax credit certificate for any unused input tax which may be used in payment of his other internal
revenue taxes.

(C) Period within which Refund or Tax Credit of Input Taxes shall be Made . - In proper cases,
the Commissioner shall grant a refund for creditable input taxes within ninety (90)
days [109] from the date of submission of the official receipts or invoices and other
documents [110] in support of the application filed in accordance with Subsections (A) and
(B) [111] hereof: Provided, That should the Commissioner find that the grant of refund is not proper, the
Commissioner must state in writing the legal and factual basis for the denial.

In case of full or partial denial of the claim for tax refund, the taxpayer affected may, within thirty
(30) days from the receipt of the decision denying the claim, appeal the decision with the Court of
Tax Appeals: Provided, however, That failure on the part of any official, agent, or employee of the BIR
to act on the application within ninety (90) days period shall be punishable under Section 269 of this
Code. [111]
(D) Manner of Giving Refund. - Refunds shall be made upon warrants drawn by the
Commissioner or by his duly authorized representative without the necessity of being countersigned by
the Chairman, Commission on audit, the provisions of the Administrative Code of 1987 to the contrary
notwithstanding: Provided, That refunds under this paragraph shall be subject to post audit by
the Commission on Audit.

13. Compliance Requirements

14. Invoicing and Accounting Requirements for VAT-Registered Persons.

a) Invoicing Requirements

SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. -

(A) Invoicing Requirements. - A VAT-registered person shall issue:

a. A VAT invoice for every sale, barter or exchange of goods or properties; and
b. A VAT official receipt for every lease of goods or properties, and for every sale, barter or
exchange of services.

(B) Information Contained in the VAT Invoice or VAT Official Receipt. - The following
information shall be indicated in the VAT invoice or VAT official receipt:

(1) A statement that the seller is a VAT-registered person, followed by his Taxpayer's Identification
Number (TIN); and

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that
such amount includes the value-added tax. Provided, That:

(a) The amount of the tax shall be known as a separate item in the invoice or
receipt;
(b) If the sale is exempt from value-added tax, the term VAT-exempt sale: shall be
written or printed prominently on the invoice or receipt;
(c) If the sale is subject to zero percent (0%) value-added tax, the term “zero-rated
sale” shall be written or printed prominently on the invoice or receipt.

(d) If the sale involved goods, properties or services some of which are subject to and some of which are
VAT zero-rated or Vat exempt, the invoice or receipt shall clearly indicate the break-down of the sale
price between its taxable, exempt and zero-rated components, and the calculation of the value-added tax
on each portion of the sale shall be known on the invoice or receipt: Provided, That the seller may issue
separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale.

(3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the
service; and

(4) In the case of sales in the amount of One thousand pesos (P1,000) or more where the sale or
transfer is made to a VAT-registered person, the name, business style, if any, address and Taxpayer
Identification Number (TIN) of the purchaser, customer or client.

b) Accounting Requirements
(C) Accounting Requirements. - Notwithstanding the provisions of Section 233, all persons subject to
the value-added tax under Sections 106 and 108 shall, in addition to the regular accounting records
required, maintain a subsidiary sales journal and subsidiary purchase journal on which the daily sales and
purchases are recorded. The subsidiary journals shall contain such information as may be required by the
Secretary of Finance.

(D) Consequence of Issuing Erroneous VAT Invoice or VAT Official Receipt.-

(1) If a person who is not a VAT-registered person issues an invoice or receipt showing his Taxpayer
Identification Number (TIN), followed by the word “VAT”;

(a) The issuer shall, in addition to any liability to other percentage taxes, be liable to:

(i) The tax imposed in Section 106 or 108 without the benefit of any input
tax credit; and
(ii) A 50% surcharge under Section 248(B) of this Code; [55]

(b) The VAT shall, if the other requisite information required under Subsection (B) hereof is shown on the
invoice or receipt, be recognized as an input tax credit to the purchaser under Section 110 of this Code.

(2) If a VAT-registered person issues a VAT invoice or VAT official receipt for a VAT-exempt transaction,
but fails to display prominently on the invoice or receipt the term ‘VAT exempt sale,’ the issuer shall be
liable to account for the tax imposed in section 106 or 108 as if Section 109 did not apply. [55]

(E) Transitional Period. – Notwithstanding Subsection (B) hereof, taxpayers may continue to issue VAT
invoices and VAT official receipt for the period July 1, 2005 to December 31, 2005 in accordance with
Bureau of Internal Revenue administrative practices that existed as of December 31, 2004.

15. Return and Payment of Value-Added Tax

a. Time and place of filing the returns

b. Time and place of payment
c. Withholding of Creditable Value-added Tax

Sec. 114. Return and Payment of Value-Added Tax.

(A) In General. - Every person liable to pay the value-added tax imposed under this Title shall file a
quarterly return of the amount of his gross sales or receipts within twenty-five (25) days following the
close of each taxable quarter prescribed for each taxpayer: Provided, however, That VAT-registered
persons shall pay the value-added tax on a monthly basis: Provided, finally, That beginning January 1,
2023, the filing and payment required under this Subsection shall be done within twenty-five (25) days
following the close of each taxable quarter. [113]

Any person, whose registration has been cancelled in accordance with Section 236, shall file a return and
pay the tax due thereon within twenty-five (25) days from the date of cancellation of registration:
Provided, That only one consolidated return shall be filed by the taxpayer for his principal place of
business or head office and all branches.

(B) Where to File the Return and Pay the Tax. - Except as the Commissioner otherwise permits, the
return shall be filed with and the tax paid to an authorized agent bank, Revenue Collection Officer or duly
authorized city or municipal Treasurer in the Philippines located within the revenue district where the
taxpayer is registered or required to register.

(C) Withholding of Creditable Value-added Tax. - The Government or any of its political
subdivisions, instrumentalities or agencies, including government-owned or -controlled corporations
(GOCCs) shall, before making payment on account of each purchase of goods and services which are
subject to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold the
value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold a final value-added
tax at the rate of five percent (5%) of the gross payment thereof: Provided, That beginning January 1,
2021, the VAT withholding system under this Subsection shall shift from final to creditable system: [113]
Provided, further, That the payment for lease or use of properties or property rights to nonresident
owners shall be subject to ten percent (12%) [114] withholding tax at the time of payment. Provided,
finally, That payments for purchases of goods and services arising from projects funded by Official
Development Assistance (ODA) as defined under Republic Act No. 8182, otherwise known as the Official
Development Assistance Act of 1996, as amended, shall not be subject to the final withholding tax
system as imposed in this Subsection. [113] For purposes of this Section, the payor or person in control
of the payment shall be considered as the withholding agent.

The value-added tax withheld under this Section shall be remitted within ten (10) days following the end
of the month the withholding was made.

16. Power of the Commissioner to Suspend the Business Operations of a Taxpayer

a. Failure to issue receipts or invoices

b. Failure to file a value-added tax return as required under Section 114
c. Understatement of taxable sales or receipts by thirty percent (30%) or more of his correct
taxable sales or receipts for the taxable quarter.
d. Failure of any Person to Register as Required under Section 236

SEC. 115. Power of the Commissioner to Suspend the Business Operations of a Taxpayer. –

The Commissioner or his authorized representative is hereby empowered to suspend the business
operations and temporarily close the business establishment of any person for any of the following
violations:

(a) In the case of a VAT-registered Person. –

(1) Failure to issue receipts or invoices;

(2) Failure to file a value-added tax return as required under Section 114; or
(3) Understatement of taxable sales or receipts by thirty percent (30%) or more of his
correct taxable sales or receipts for the taxable quarter.

(b) Failure of any Person to Register as Required under Section 236.

The temporary closure of the establishment shall be for the duration of not less than five (5) days and
shall be lifted only upon compliance with whatever requirements prescribed by the Commissioner in the
closure order.