Article 45p. 45

NATIONAL INTERNAL REVENUE CODE TAXATION, TARIFF and CUSTOMS LAWS

(2) The lease or 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.

(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);

(2) 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 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;

(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 exclusively for international

shipping or air transport operations;

(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;

(6) Transport of passengers and cargo by domestic air or

sea vessels from the Philippines to a foreign country; and

(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.

(8) Services rendered to:

(i)

Registered enterprises within a separate customs

territory as provided under special law; and

(ii) Registered enterprises within tourism enterprise zones

as declared by the TIEZA subject to the provisions under

Republic Act No. 9593 or The Tourism Act of 2009.

Provided, That subparagraphs (B)(1) and (B)(5) hereof shall

be subject to the twelve percent (12%) value-added tax

and no longer be subject to zero percent (0%) VAT rate

upon satisfaction of the following conditions:

(1) The successful establishment and implementation of

an enhanced VAT refund system that grants refunds of

creditable input tax within ninety (90) days from the filing

of the VAT refund application with the Bureau: Provided,

That,

to

determine

the

effectivity of item no. 1, all

applications filed from January 1, 2018 shall be processed

and must be decided within ninety (90) days from the

filing of the VAT refund application; and

(2) All Pending VAT refund claims as of December 31, 2017

shall be fully paid in cash by December 31, 2019.

Provided, That the Department of Finance shall establish

a VAT refund center in the Bureau of Internal Revenue

(BIR) and in the Bureau of Customs (BOC) that will handle

the processing and granting of cash refunds of creditable

input tax.

An amount equivalent to five percent (5%) of the total

value-added tax collection of the BIR and the BOC from

the immediately preceding year shall be automatically

appropriated annually and shall be treated as a special

account in the General Fund or as trust receipts for the

purpose of funding claims for VAT Refund: Provided, That

any unused fund, at the end of the year shall revert to the

General Fund.

Provided, further, That the BIR and the BOC shall be

required to submit to the COCCTRP a quarterly report of

all pending claims for refund and any unused fund.

(as amended by RA No 10963)

SEC. 109. Exempt Transactions. - [54]

(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 a kind generally used as, or yielding or

producing

foods

for

human

consumption;

and

breeding stock and genetic materials therefor.

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 sugar or

raw cane sugar and molasses, ordinary salt and

copra shall be considered in their original state;

For this purpose, notwithstanding the process/es

involved in its production, 'raw sugar or raw cane

sugar' means sugar whose content of sucrose by

weight,

in

the

dry

state,

corresponds

to

a

polarimeter reading of less than 99.5 degrees. (as

amended by Republic Act No. 10864, [June 10, 2016])

55]

(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);

(C) Importation of professional instruments and

implements,

tools

of

trade,

occupation

or

© Compiled by RGL

45 of 201