Summary
RR No. 13-2018 implements the Value-Added Tax and Percentage Tax provisions of RA No. 10963 (TRAIN Law). It further amends RR No. 16-2005 (Consolidated VAT Regulations of 2005), as amended.
Key points
- Zero-rated sales of goods. Export sales are zero-rated, including shipped goods paid in acceptable foreign currency and sales to export-oriented enterprises whose export sales exceed 70% of total annual production. Sales of goods, supplies, equipment and fuel for international shipping or air transport are also zero-rated if used exclusively for it, and any portion used otherwise is subject to 12% VAT.
- Condition for 12% VAT. Items a.2, a.3 and a.4 become subject to 12% VAT once an enhanced VAT refund system pays refunds within ninety (90) days from filing, and pending VAT refund claims as of December 31, 2017 are fully paid in cash by December 31, 2019. Claims filed before January 1, 2018 stay under the 120-day processing period.
- Zero-rated services and electricity. Zero-rated services include services paid in acceptable foreign currency to non-resident persons or those doing business outside the Philippines, international shipping and air transport services, and sale of power or fuel from renewable energy sources. Sale of electricity by generation, transmission and distribution is subject to 12% VAT on gross receipts.
- VAT-exempt transactions. Exempt items include sales by non-VAT-registered persons with gross annual sales not exceeding P3,000,000.00, and sales of real property not primarily held for sale or lease. Residential lot sales up to P1,500,000.00, house and lot sales up to P2,500,000.00, and residential leases up to P15,000.00 monthly per unit are also exempt. From January 1, 2021, the house and lot exemption applies to selling prices of not more than P2,000,000.00.
- Percentage Tax. A person exempt under Section 109 (1) (BB) who is not VAT-registered pays 3% of gross quarterly sales or receipts. Cooperatives and self-employed individuals and professionals who choose the 8% tax are exempt from it.
- Registration changes. A VAT-registered taxpayer under the P3,000,000.00 threshold may stay VAT-registered under the optional registration of Section 236(H) and may not cancel it for three (3) years. A VAT taxpayer who opts to become non-VAT submits an inventory list of unused invoices and receipts and surrenders them for cancellation.
Who is affected
- VAT-registered persons
- Non-VAT taxpayers subject to Percentage Tax
- Exporters and international shipping and air transport operators
- Lessors of residential units
Deadlines and effectivity
- Regulations effective: January 1, 2018
- Pending VAT refund claims: fully paid in cash by December 31, 2019
- House and lot exemption change: beginning January 1, 2021
Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.
Copies of BIR issuances are hosted here for reference. For the official version, check bir.gov.ph. Summaries by Tax Resources PH are not a substitute for the full text or professional advice.