Bureau of Internal Revenue(BIR)

Hi! Greetings.

Respectfully seeking clarification on NIRC:

Section 109 (A) provides that sale of agricultural products in its original state (e.g., polished and/or husked rice) is exempted from VAT.

Section 109 (CC) further states that sale of goods/services ("OTHER THAN" those already exempted from VAT) shall likewise be exempted from VAT if the gross annual sales do not exceed P3M (consequently, it shall be subjected to percentage tax).

With that, a Rice Trading business, whether hitting or not the P3M threshold, is exempted from both VAT and percentage tax. Is my understanding correct?

November 10, 2023

Dear Ms. Ann O:

Greetings!

Thank you for your request dated Nov 09, 2023 under Executive Order No. 2 (s. 2016) on Freedom of Information in the Executive Branch.

Your request

You asked for Clarification on VAT and PT.

Response to your request

In reply, if the total gross sales/receipts do not exceed the Value-Added Tax (VAT) threshold of three (3) Million Pesos, the individual taxpayer is subjected to the three percent (3%) percentage tax.

Thank you.

Respectfully,

FOI Receiving Officer
Public Information and Education Division

Thank you for the prompt response. 

Nonetheless, I would like to respectfully seek confirmation that the provision of Section 109 (CC) of subjecting businesses with less than P3M annual sales to percentage tax (PT) pertains only to those businesses "other than/to the exclusion " of those already VAT-exempted. 

Thus, a rice trading trading business which is VAT-exempt  (Section 109 -A) logically follows that the same is also exempted from PT (Section 109 -CC).

Otherwise, it would be tantamount to an unfair treatment between bigger vs. smaller business where bigger businesses are given the privilege of business tax (VAT) exemption but denying the same privilege to smaller businesses by taxing them (PT)?