Understanding VAT exemptions
- Dante Torres
- 3 days ago
- 4 min read
IN a profession marked by constant change and intricate legislation, taxation in the Philippines is anything but static. For certified public accountants (CPAs), navigating these changes has become a routine challenge — especially when it comes to the evolving provisions of the value-added tax (VAT).
Among the most dynamic portions of our Tax Code is Section 109, which lays out the transactions exempt from VAT. What began as 26 subsections under Republic Act (RA) 8424, or the 1997 Comprehensive Tax Reform Program, has expanded to 30, each shaped by economic shifts, global developments, and most recently, the growing digital economy.
As a practitioner, I have personally experienced the difficulty of reconciling various amendments scattered across multiple laws. Relying on just one version of the law often leads to confusion or outdated interpretations. That's what compelled me to compile and maintain an updated, consolidated reference for Section 109 — initially for internal use within our firm and now as a resource for fellow CPAs and tax professionals nationwide. This is my humble contribution to the profession I continue to serve.
Tracing the evolution
To fully understand VAT exemptions today, one must not only study the original 1997 provision but also review the amendments made by the following laws: – RA 9337 (2005), the VAT Reform Act.
– RA 10963 (2017), the Train Law.
– RA 11534 (2021), the Create Law.
– RA 11976 (2024), the Ease of Paying Taxes Act.
– RA 12023 (2024), the Taxation of Digital Services Act.
These laws reflect the government's evolving priorities — from food security and socialized housing to pandemic response and digital transformation.
A look at key exemptions
Here are just some of the most significant VAT-exempt transactions under the updated Section 109: – Agricultural and marine products in their original state — Including polished rice, corn grits, raw cane sugar and ordinary salt (RA 9337).
– Inputs to agriculture — Fertilizers, seeds, feeds, fingerlings and related ingredients, unless intended for pets or nonfood animals.
– Balikbayan and OFW items — Personal and household effects of returning residents and overseas Filipino workers (OFWs), subject to customs clearance.
– Educational services — Including online classes and training modules provided by the Department of Education-, Commission on Higher Education-, and Technical Education and Skills Development Authority-accredited institutions (RA 12023).
– Medical and hospital services — Provided these are not rendered by professionals in a personal capacity.
– Employer-employee services — Wages and services arising from direct employment relationships.
– Cooperative sales and lending — By duly registered agricultural, credit and non-agri coops, subject to limitations.
– Low-cost housing — Residential lots valued up to P2.5 million and houses up to P4.2 million — thresholds that are subject to triennial adjustment (RA 11534).
– Lease of residential units — Where monthly rent does not exceed P15,000 (RA 10963).
– Publications — Educational reading materials in physical or digital format, provided they are not primarily advertising-based.
– Senior citizens and persons with disabilities purchases — Consistent with RA 9994 and RA 10754.
– Bank and digital financial services — Including those delivered through online platforms (RA 12023).
– Sales by non-VAT registered persons — Where gross annual sales do not exceed P3,000,000 (RA 11976).
– Covid-19-related exemptions — Applicable from 2021 to 2023, covering PPE production equipment and Covid-specific drugs and devices.
– Importation of goods by an export-oriented enterprise whose export sales is at least 70 percent of the total annual production of the preceding taxable year (RA 12066).
These exemptions are not merely technical — they have real social and economic implications, designed to support agriculture, public health, education, small enterprises and vulnerable sectors.
The role of the tax professional
The VAT exemption list is long and nuanced but essential to apply correctly. A mistake — whether in classification, threshold or timing — can lead to hefty assessments or missed opportunities. This is where the role of the tax professional becomes critical.
We must go beyond textbook theory and develop a firm grasp of practical implementation. This requires vigilance, continued learning and reliable references. In an era when legislation can shift rapidly, a tax practitioner's ability to stay updated is part of ethical and effective practice.
I created this consolidated VAT reference not just for compliance but as a tool for empowerment — for firms big and small, especially those in provinces or with limited access to updated training.
A call to community
My hope is that more professionals will take the initiative to share their learnings, build community-based resources and uplift one another in our shared pursuit of excellence. In a profession built on precision, diligence and integrity, collaboration is key.
For the thousands of CPAs navigating the maze of Philippine taxation, this consolidated guide is more than a checklist. It is a lifeline. And a reminder that we can all contribute to shaping a stronger, more informed accounting profession.
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Dante R. Torres is the managing partner of DRTorres and Company CPAs. He is a past national director and treasurer of the Philippine Institute of Certified Public Accountants (Picpa), an honorary life member and a former president of the Acpapp Bulacan Chapter. The views expressed in this article are solely his own and do not necessarily reflect those of the institutions mentioned.
