Tuesday, May 08, 2007 Tax notes: Amendments to the VAT regulations
IN Revenue Regulations (RR) 4-2007, the Bureau of Internal Revenue (BIR) has provided clarifications and introduced amendments to RR 16-2005 or the consolidated value-added tax (VAT) regulations, as follows:
1. The 12 percent VAT rate was reflected in the regulations.
a. In determining the VAT component, if the contract is silent, the selling price in the sales document shall be deemed VAT-inclusive. If the fair market value (FMV) is higher than the selling price, the FMV shall be deemed VAT-exclusive.
b.For installment sale, the output/input VAT shall be recognized upon receipt/payment of every installment payment. The VAT rate on the date of installment payment applies, regardless of when the contract to sell was executed.
c.In a tax-free exchange pursuant to Section 40 (C) (2) of the Tax Code, the transfer of real property between two real estate dealers in exchange for shares shall be VAT-exempt.
3.The sale of goods/properties to Ecozone enterprises shall be considered constructive exports subject to automatic VAT zero-rating. No similar amendment was introduced on the sale of services.
4. Non-life reinsurance premiums shall not be subject to VAT if the non-life insurance premium has already been subjected to VAT.
5. Gross receipts subject to VAT shall not include amounts earmarked for payment to an unrelated third party, or amounts received as reimbursement for advance payment made to a third party. The payment should be evidenced by a sales invoice/official receipt in the name of the party claiming the expense.
6. Sale of real property not primarily held for sale or for lease is, in general, VAT-exempt. However, if such property is used in the trade or business of the seller, the sale shall be subject to VAT as an incidental transaction to the seller’s main business.
7. Services of money changers and pawnshops as non-bank intermediaries are subject to percentage tax, hence they are exempt from VAT.
8. Philippine Economic Zone Authority and other ecozone-registered enterprises enjoying the preferential tax rate of 5 percent in lieu of all taxes are required to register as non-VAT taxpayers. (Source: Punongbayan & Araullo)
