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VAT exemptions under new Philippine Tax Reform (2018)




What are VAT-able and VAT-exempt items under the recently approved Tax Reform for Acceleration and Inclusion (TRAIN) law implemented beginning January 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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About this post: non vat for the new train bir pinoy, TRAIN Law VAT for purchase of real peoperty, vat exempt transactions in the philippines, vat on train law, vatable and non vatable products

28 thoughts on “VAT exemptions under new Philippine Tax Reform (2018)”

  1. Vincent crist says:

    Are those working in the BPO industiries earning less than 21k a month included in reform?

  2. daphne obligar says:

    Are professionals like doctor and lawyers earning > 3 Million subjwct yo Vat?

  3. Esmeralda Fadul says:

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

  4. Chinggay says:

    Hi. Ask ko lang po if anong section ng TRAIN law yung nag-indicate na VAT exempt na ang mga GOCCs? Salamat po.

  5. bert says:

    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.

  6. Angel says:

    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

  7. diana pacis says:

    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.

    1. diana pacis says:

      bakit walang nagrereply sa mga comments?

  8. Adel Delgado says:

    How about Vat exemptions for motor vehicles used in PEZA? Are they still Vat exempt? Thanks

  9. Eerhtytenin Evlewt Enin says:

    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.

  10. Eleo pineda says:

    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?

    1. Eerhtytenin Evlewt Enin says:

      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.

  11. Nowe says:

    Im planning to buy condo worth 3.1m is that vat exempt?

    1. Eerhtytenin Evlewt Enin says:

      No, it is already vatable since it exceeds the vat threshold of P2.5M.

  12. FERNANDO S NUCUM JR says:

    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?

    1. A says:

      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

  13. Rose says:

    Is the association dues in private subdivision is VAT exempt? Thanks

  14. Ralph says:

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

    1. Eerhtytenin Evlewt Enin says:

      Hi Ralph. Hindi na dahil tinanggal na ang personal at additional exemption. Pero wag kang mag-alala dahil itinaas na rin naman ang bracket at wala nang income tax ang mga kumikita ng P250,000 pababa taon-taon.

  15. LAurene says:

    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

  16. LAurene says:

    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

  17. Eerhtytenin Evlewt Enin says:

    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.

  18. LAurene says:

    Thank you very much po

  19. Norman Calamba says:

    Is system loss charge stil VAT-able under the TRAIN law?

  20. AK says:

    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!

  21. Edgardo Lino P. Avila says:

    What is the vat exemption on condo units

    1. Eerhtytenin Evlewt Enin says:

      No offense but this has already been discussed is the comments above, both sale and lease. All you need to do is to read. Why so lazy?

    2. Eerhtytenin Evlewt Enin says:

      *in

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