Preparation of Listing of Potential Value-Added Tax (VAT) Registerable Taxpayers by Revenue District Offices and Submission of Other Data on These Potential VAT Taxpayers

April 7, 1987 REVENUE MEMORANDUM ORDER NO. 08-87 SUBJECT : Preparation of Listing of Potential Value-Added Tax (VAT) Registerable Taxpayers by Revenue District Offices and Submission of Other Data on These Potential VAT Taxpayers TO : All Regional Directors, Revenue District Officers and Others Concerned 1. Objectives and Scope This Order prescribes guidelines and procedures for drawing up a comprehensive listing of potential VAT registerable taxpayers in each Revenue District preparatory to the adoption of the VAT System. This list will serve as the basis for the allocation of personnel and resources, computer-generation of registration numbers and other administrative requirements. This likewise seeks to prescribe procedures in order to generate reliable data on business establishments required in connection with the implementation of the proposed VAT System. Such listing and data are to cover only potential VAT taxpayers, namely, sellers of goods (manufacturers, producers, repackers, millers, distributors, wholesalers, traders and retailers) and selected services (contractors, cinematographic film owners, lessors and distributors, lessors of personal property, brokers and others whose activity consists essentially of sale of services for a fee regardless of whether or not the performance of the service calls for the exercise of physical or mental faculties of such contractors, but excluding those enumerated in Annex B. cd i 2. Sources of Data The following records and documents are to be utilized as sources of data for the listing and other data requirements: a. 1986 Income Tax Returns (ITRs); b. Percentage Tax Returns for the 4th Quarter of 1986; c. Business (Fixed Tax) Returns for 1987; d. Records of local governments; e. Directories of sectoral industries; and f. Telephone directories (buyer's guide) and others. 3. Procedures: a. Identification of VAT Taxpayers. From the tax returns received by each Revenue District Office (RDO), potential VAT Taxpayers must be identified, i.e., sellers of goods and selected services mentioned in the Scope portion of this Order. Other potential taxpayers derived from the other aforementioned sources of data must be added to those identified based on tax returns. cdt The 1986 Income Tax Returns (ITRs) of these potential VAT taxpayers must be segregated from the other returns received by the RDO. In connection with this project, collection agents are directed to forward all ITRs received to their respective RDOs. ITRs already transmitted to or received in the Assessment Branches shall likewise be referred to the RDOs. b. Determination of Gross Annual Sales/Receipts of Each Potential VAT Taxpayer From the segregated ITRs for 1986, each RDO must determine the amount of gross sales/receipts of each potential VAT taxpayer. c. Preparation of the Listing of Potential VAT Taxpayers Those identified as potential VAT taxpayers should be listed showing the following information: 1) Name and address of taxpayer; 2) Business organization: individual or corporation; and 3) Gross Annual sales/receipts based on 1986 ITR. The preparation of the listing must be closely supervised by the Revenue District Officers. The listing may be handwritten; it must conform with the format presented in Annexes B-1 to B-8 and must be signed by the person who prepared it. d. Preparation of a summary of the number of taxpayers likely to be subject to VAT by gross annual income bracket. cdt From the listing generated, each RDO must determine the total number of taxpayers falling under the following gross annual income brackets: P100,001 - P200,000; P200,001 - P300,000; P300,001 - P500,000; and over P500,000, in accordance with the form herewith presented as Annex C. e. Transmission of Listing and Data to the National Office The listings and data generated by the RDOs must be covered by a transmittal certification by the Revenue District Officer and forwarded to the Office of Deputy Commissioner Victor A. Deoferio, Jr. on or before April 30, 1987. 4. Management Audit Team During the data gathering stage, a management audit team from the Inspection Service may be sent in order to ensure the veracity of the data gathered by the Revenue District Offices. 5. Personnel To be Involved For the generation of the required data, Revenue District Officers are instructed to utilize all Revenue Examiners and Clerks as may be necessary. 6. Priority To Be Given Priority is to be given to this Order and Revenue District Officers are to be held responsible for the strict compliance with the formats and deadline set forth in this Order. This Order takes effect immediately. (SGD.) BIENVENIDO A. TAN, JR. Commissioner ATTACHMENT TRANSACTIONS AND SERVICES EXEMPT FROM THE VALUE-ADDED TAX (a) Sale of nonfood agricultural, marine and forest products in their original state by the primary producer or the owner of the land where the same are produced. (b) Sale or importation in their original state of agricultural and marine food products for human consumption; and livestock and poultry of a kind generally used as, or yielding or producing land for human consumption, including breeding stock and genetic materials therefor. The products under this paragraph and paragraph (a) shall be considered in their original state even if they have undergone the simple processes of preparation or preservation for the market, such as freezing, drying, salting, smoking or stripping. Polished and/or husked rice and corn grits shall be considered as in their original state for purposes of this paragraph. acd (c) Sale or importation of fertilizers, pesticides and herbicides; chemicals for the formulation of pesticides and herbicides; seeds, seedlings and fingerlings; fish, animal and poultry feeds; (d) Sale or importation of petroleum products (except lubricating oil, processed gas, grease, wax and petrolatum) subject to excise tax imposed under Title VI; (e) Importation of raw materials to be used by the importer himself in the manufacture of petroleum products subject to excise tax; (f) Printing, publication, importation or sale of books; and any newspaper, magazine, review, or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to publication of advertisements; (g) Importation of passenger and/or cargo vessel of more than ten thousand tons, whether coastwise or ocean-going, including engine and spare parts of said vessel, to be used by the importer himself as operator thereof; (h) Importation of personal and household effects belonging to residents of the Philippines returning from abroad and non-resident citizens coming to resettle in the Philippines, Provided That such goods accompany them or arrive in the Philippines within ninety days before or after the returnee's arrival and Provided, however , That such goods are exempt from customs duty under the Tariff and Customs Code of the Philippines; (i) Importation of professional instruments and implements, wearing apparel, domestic animals, and personal household effects (except any vehicle, vessel, aircraft, machinery, other goods for use in manufacture and merchandise of any kind in commercial quantity) belonging to persons coming to settle for the first time in the Philippines, for their own use and not for sale, barter or exchange, accompanying such persons, or arriving within ninety days before or after their arrival, upon the production of evidence satisfactory to the Commissioner, that such persons are actually coming to settle in the Philippines, that the goods were bought from their former place of abode and that the change of residence is bona fide; (j) Services rendered by the following persons: 1. Operators of common carriers; 2. Caterers; 3. Hotel or motel operators; 4. Banks and non-bank financial intermediaries; 5. Insurance companies; and 6. Those subject to amusement taxes and forest charges. (k) Milling of rice and corn for others; (l) Medical, dental, hospital and veterinary services; (m) Educational services rendered by private educational institutions, duly accredited by the Department of Education, Culture and Sports, and those rendered by government educational institutions; (n) Sale of art, literary works, and musical compositions or creations of such works by the artist himself; (o) Services performed as singers, emcees, radio and television broadcasters, talents, choreographers, musical directors, radio, television and stage directors; (p) Services performed as professional athletes. (q) Leasing of real property; (r) Services performed in the exercise of profession or calling subject to the occupation tax under the Local Tax Code, except customs brokers; (s) Services rendered by individuals pursuant to an employer-employee relationship; (t) Services rendered by regional or area headquarters established in the Philippines by multinational corporations which act as supervisory, communications and coordinating centers for their affiliates, subsidiaries or branches in the Asia-Pacific Region and do not earn or derive income from the Philippines; and (u) Transactions which are exempt under special laws or international agreements to which the Philippines is a signatory.