Concept of value-added tax

The value-added tax is a tax on consumption "expressed as a percentage of the value added to goods or services" purchased by the producer or taxpayer. As an indirect tax on services, its main object is the transaction itself or, more concretely, the performance of all kinds of services conducted in the course of trade or business in the Philippines. These services must be regularly conducted in this country; undertaken in "pursuit of a commercial or an economic activity;" for a valuable consideration; and not exempt under the Tax Code, other special laws, or any international agreement. (G.R. No. 164365)

There must be sale, barter, exchange or lease of goods or properties and services in the Philippines or importation of goods into the Philippines.

The seller is the one liable under the law to pay for the value-added tax. However, the amount thereof (also called the burden) may be shifted or passed on to the buyer, transferee or lessee of goods, properties or services.

In the case of importation of goods, the importer is the one liable for the value-added tax.