RR No. 16-2005: Prescribes the Consolidated Value-Added Tax Regulations of 2005 superseding RR No. 14-2005

Key points

1. Nature and rate of VAT. VAT is a consumption tax on the sale, barter, exchange or lease of goods or properties and services in the Philippines, and on importation. The seller is statutorily liable, but the tax may be passed on to the buyer. For importation, the importer is liable. The rate on sales of goods or properties is 10% of the gross selling price or gross value in money, and services are taxed at 10% of gross receipts (excluding VAT).
2. Real property sales. Real properties held primarily for sale or lease in the ordinary course of business are subject to VAT. Sale of a residential lot exceeding P1,500,000.00 or a house and lot exceeding P2,500,000.00, and installment sale of a house and lot exceeding P1,000,000.00, with the instrument executed on or after July 1, 2005, are subject to 10% VAT. Gross selling price is the higher of the consideration stated or fair market value.
3. Zero-rated sales. Export sales, foreign currency denominated sales, and sales to persons or entities deemed tax-exempt under special law or international agreement are subject to 0%. Except for export and foreign currency denominated sales, zero-rating needs prior application with the BIR. Without an approved application, the transaction is treated as exempt.
4. Exempt transactions. Exempt transactions include agricultural and marine food products in their original state, fertilizers, seeds and feeds, medical, dental, hospital and veterinary services (except by professionals), educational services of accredited institutions, and books and newspapers. Also exempt are sale of a residential lot valued at P1,500,000.00 and below or a house and lot valued at P2,500,000.00 and below (instrument executed on or after November 1, 2005), lease of residential units with monthly rent not exceeding P10,000.00, and sales or receipts not exceeding P1,500,000.00 a year for other transactions.
5. Input tax and VAT payable. Output tax is deducted by creditable input tax supported by VAT invoices or official receipts. Excess input tax carried over that may be credited each quarter may not exceed 70% of the output tax, with the rest carried over. Input tax on zero-rated sales may be refunded or applied for a tax credit certificate. Transitional input tax is 2% of beginning inventory value or actual VAT paid, whichever is higher, and presumptive input tax is 4% for certain processors of primary agricultural products.
6. Reports, penalties and effectivity. VAT persons with quarterly total sales or receipts (net of VAT) exceeding P2,500,000.00 submit the Summary List of Sales, and those with quarterly total purchases (net of VAT) exceeding P1,000,000.00 submit the Summary List of Purchases. Each is due by the 25th day after the quarter, or the 30th day for Large Taxpayers Service and EFPS taxpayers filing electronically. Failure to submit carries a P1,000.00 penalty for each failure, up to P25,000.00 a year. The Regulations take effect November 1, 2005.

Who is affected

• VAT-registered persons and sellers of goods, properties and services
• Importers

Deadlines and effectivity

• Effective November 1, 2005
• Summary lists due the 25th day (or 30th day for LTS and EFPS filers) after the quarter
• Unused invoices with proper stamp usable up to December 31, 2005