VAT exemptions under Philippine TRAIN Tax Law



What are VATable and VAT-exempt items under the recently approved Tax Reform for Acceleration and Inclusion or TRAIN Law implemented starting 2018?

To recap, the TRAIN tax reform program includes various provisions that touch on reducing personal income taxes while increasing taxes on products such as sweetened beverages, oil, petroleum, and fuel products, coal, stock transactions, cars and automobiles, among others.

Also included in the tax reform is the updating of VAT-able products and transactions. The list of items that will or won’t be charged the 12% Value Added Tax (VAT) underwent several revisions in Congress in the last few months, but the final version is shown below.

We begin with a list of products or transactions that currently enjoy VAT exemption and will continue to be VAT-exempt under the new tax reform program.

* * * UPDATED resources on the approved TRAIN Tax Reform below:

Products, service, or groups that will continue to be VAT-exempt

  • Food and agricultural products
  • Senior citizens
  • Persons with Disability (PWD)
  • Cooperatives
  • Tourism
  • Education
  • Renewable energy
  • Health
  • Enterprises and BPOs located in Special Economic Zones
  • Condominium association dues
  • Rentals and leases below P15,000 per month

The following items, meanwhile, will now also enjoy the benefit of not paying VAT.

Groups, products, or transactions that will be VAT-exempt

  • Businesses with annual gross sales of P3 million and below
  • Government owned and controlled corporations (GOCCs), state universities and colleges (SUC), and government agencies
  • Medicines for diabetes, cholesterol, and hypertension (VAT exemption beginning 2019)
  • Socialized housing, or houses priced at P450,000 and below, and low-cost housing, or those priced at P3 million and below (VAT exemption retained from 2018 to 2020 only)

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37 thoughts on “VAT exemptions under Philippine TRAIN Tax Law”

  1. Are condominium association fees vat-exempt? Why do Cityland condominiums admin charge condominium owners/tenants 12% vat ?

    Reply
  2. i am a job order of cebu province nurse 1, our annual income does not even reach 250,000php. but we are still taxed 5% because we are considered professionals not only our income but our philhealth sharing was also taxed
    . I hope i would get reply on this matter, and possible on what basis we are taxed. hope my concern will be answered.

    Reply
  3. Ask ko lang po PWD ako working in BPO wala po bang tax sa train law ang PWD? KAse may tax ako kinakaltas sa sweldo ko

    Reply
  4. Hi, how can i compute the amount of vat payable on the ff: transactions
    GA – 15,000 inclusive of vat (sales)
    Private – 8,500.00 inclusive of vat (services)
    Purchases – for GA only – 10,980 inclusive of vat
    Purchases – common – 5,350.50 inclusive of vat
    W/h tax by GA – 1% = 133.93
    Final tax by GA – 5% = 669.64

    Hope to hear from you.

    Reply
  5. Hi Diana,

    I dont know why but I can’t reply directly so I’m just gonna leave this here. Hope you’ll find it.

    VAT Payable based on your facts above is P703.36.
    P910.71 output vat from private less P207.35 input vat from common purchases.
    Total input vat of P573.27 is to be allocated between GA and private based on total sales of P23,500.
    Thus, only 207.35 is to be allocated to private.
    Any difference from input and output vat from GA is to be treated as gain or loss.
    I’m not sure about my calculations, but I’m sure about the theory. Feel free to recheck.

    Reply
  6. Good morning sir/ maam.. Ask lang po me option pa rin ba na i retain as vat registered kahit 2.5million lang ang annual sales last year?

    Reply
    • Hi Eleo,

      Yes, they still have the option to be vat-registered. For more info, please read my last reply on Berganio Marc’s query at the facebook discussions above.

      Reply
  7. GOOD MORNING SIR. I HAVE A QUERY ON LEASE OF A RESIDENTIAL UNIT WITH P25,000 MONTHLY RENTAL..
    BASED ON THE NEW TRAIN LAW RENTALS OF SA RESIDENTIAL UNIT NOT EXCEEDING P15,000 ARE VAT EXEMPT.
    BUT THEN THE THRESHOLD FOR VAT EXEMPT IS P3MILLION. MY QUERY SIR. WILL THE P25,000 MONTHLY RENT BE SUBJECT TO 12% VAT EVEN IF THE ANNUAL RENTAL IS P300,000 WHICH IS BELOW THE P3MILLION THRESHOLD?

    Reply
    • the train law states that when a residential units is equal to or less than the monthly threshold of 15,000 regardless off the aggregate annual gross receipts. The tax payer is exempt from both the vat and opt.

      if the monthly rental per unit exceed 15,000 then check the aggregate annual gross receipts if its below 3,000,000 then you will be subject to OPT

      if in case you exceeded the 3,000,000 then you will be subject to 12% vat.

      in your case you will be liable for business tax = OPT of 3% of gross receipts

      Reply
  8. Kakaemploy ko lang ulit…Hindi na ba ako makakakuha ng Tax Exemption para sa 2 kong anak na PWD under the TRAIN Law?

    Reply
  9. Hello! good day! May itatanong lang po ako regarding rental income. Nagdedeclare ang lessor ng rental income upos issuance of its official receipt or payment ng lessee. Pero ang lessee po ay hindi nagbabayad monthly ng rentals at nag aacumulate ang kanyang payables sa lessor. In this case, nagdedeclare lang po ang lessor ng income kung kailan nya na receive and bayad mula sa payee. Pero ang payee po ay nagwiwithhold ng 5% monthly . If ang lessee ay nagbayad ng 11 months for the whole year (example 15,000/month), ang na declare lang ni lessor ay 165,000, pero kung i base sa 2307 na nabigay ng lessor, rental income must be 180,000 because nagwiwithhold sya monthly ng 750 (15000×5%). Hindi po ba ito conflict? Or tama po ba na magdeclare lang ang lessor ng income upon receiving the payment? Any reference din po sana kung meron. Thank you

    Reply
  10. Hello! good day! May itatanong lang po ako regarding rental income. Nagdedeclare ang lessor ng rental income upos issuance of its official receipt or payment ng lessee. Pero ang lessee po ay hindi nagbabayad monthly ng rentals at nag aacumulate ang kanyang payables sa lessor. In this case, nagdedeclare lang po ang lessor ng income kung kailan nya na receive ang bayad mula sa lessee. Pero ang lessee po ay nagwiwithhold ng 5% monthly . If ang lessee ay nagbayad ng 11 months for the whole year (example 15,000/month), ang na declare lang ni lessor ay 165,000, pero kung i base sa 2307 na nabigay ng lessee, rental income must be 180,000 because nagwiwithhold sya monthly ng 750 (15000×5%). Hindi po ba ito conflict? Or tama po ba na magdeclare lang ang lessor ng income upon receiving the payment? Any reference din po sana kung meron. Thank you

    Reply
  11. Hi Laurene,

    From what you have presented above, we can infer that the lessee is using accrual basis of accounting while the lessor is using cash basis of accounting, or at least on rental expense / income.

    On the issue of withholding tax:
    The general rule is: “obligation to withhold arise upon your payment, accrual, or recording in the books of an expense subject to withholding tax, whichever comes earlier.” Thus, the lessee is correct.

    On the issue of taxable income:
    Section 43 of NIRC states that “the taxable income shall be computed upon the basis of the taxpayer’s annual accounting period (fiscal year or calendar year, as the case may be) in accordance with the method of accounting regularly employed in keeping the books of such taxpayer.” Thus provided that he can justify his use of cash basis, the lessor is also correct.

    Reply
  12. Hi, I have some question about exceeding 3M VAT Threshold.

    1. If ever I exceed the 3M VAT Exception what would be the computation be?

    Eg.
    Income 3,000,001.00
    Exception (40%) 1,200,000.40

    Taxable Income 1,800,000.60

    Annual Income Tax 430,000.18
    Percentage Tax (3%) 90,000.03

    Total Tax 520,000.21

    2. Do I still need to pay the 3% Percentage Tax if I am under VAT?

    3. Will they get the 12% VAT on my Gross Annual Income or in my Taxable Income (Gross Annual Income – 40% OSD)?

    Thank you very much!

    Reply
  13. Ano ang impact ng TRAIN LAW sa HMO BENEFITS? Sa BPO company where I am with, ang TAX ng private HMO ay biglang naka charge na sa mga empleyado. Hindi po ba VAT exempt na ang HMO?

    Reply
  14. Hi Jean. What do you mean “TAX” of private HMO? Input tax? What I’ve heard regarding HMO is that the BIR recently released RMC 50-2018 which clarified that HMO paid by the employers should for part of the Other Benefits which are subject to the 90k threshold.

    P.S. This is my third time trying to send this reply.

    Reply
  15. The hospital is renting a clinic space to doctors at 5,000.00 a month per clinic. The total monthly income out from the rental is 40,000.00. Is the rental income amount to be added in the out patient sale of medicines which is vatable?

    Reply
  16. hello po! sir tanong ko lang po kung subject po kami sa VAT (12%) nagre rent po office namin meron po kaming 4 units na inuupahan Php18K each total of Php72K a month po bale annually po total of Php864,000.00 payment namin kmi rin pong lessee ang nagso shoulder ng EWT bale net of tax po ung binabayaran namin. Tama po na na IVat po kami ng lessor namin though hindi po kami umabot sa Php3M threshold na payment po. salamat po ng marami.

    Reply
  17. Hi, good day!

    In a service company, where clients have offices based abroad, if payment is made by their Philippines office, they are subject to VAT. If the payment is processed or made by their foreign counterpart, it becomes VAT-exempt. Why is this so? What particular BIR ruling is it?

    Appreciate your prompt reply. Thanks!

    Reply
  18. Hi Good Morning,

    I have read from the trail of queries above that sale of a condo unit worth P3.0Million and above is Vatable. Is this applicable to all sellers, whether individual or corporation? How much is the VAT on a condo sale in excess of P3.0Million and Is this on top of the Capital Gains Tax of 6% of the sale? May I request for a computation of the VAT and Capital Gains Tax on a Condo Unit for sale in the amount of say P6,000,000.00.

    Thank you and regards,

    Jess D. gomez

    Reply
  19. Hello, good day!

    Ano pong pagkakaiba ng CUSA (Common Use of Service Area) at Association Dues? Based on above discussions, condominium association dues are VAT-exempt. What about CUSA? Is there a case na VAT-exempt din po ito?
    Our lessor charged VAT on CUSA that is being billed to us.\

    Thank you very much.

    Reply

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