Is Selling Rice, Fish, or Vegetables VAT-Exempt? Agricultural and Marine Food Products Under NIRC Section 109(A)

Selling fresh fish, vegetables, palay, or live poultry is VAT-exempt under NIRC Section 109(A) — but only while the product stays in its “original state.” The law extends that status to goods that have undergone simple preparation or preservation, such as freezing, drying, salting, or roasting. Once a product goes through further processing — milling into flour, refining into sugar, or canning with additives — the exemption ends and the sale becomes subject to 12% VAT.

What exactly does NIRC Section 109(A) exempt? #

Section 109(A) of the National Internal Revenue Code exempts the sale or importation of agricultural and marine food products in their original state, along with livestock, poultry, and their breeding stock and genetic materials, from the 12% value-added tax. This is the single broadest food-related VAT exemption in the Code, and it applies regardless of the seller’s size — a market vendor and a large agribusiness supplier both qualify on the same terms, provided the product itself meets the “original state” test. The exact statutory text reads:

“Sale or importation of agricultural and marine food products in their original state, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefor.”

This exemption sits inside the larger Section 109 exempt-transactions list, which also covers education, healthcare, cooperatives, and low-value sales below the VAT threshold. For the full list and how exemption differs from zero-rating, see the pillar guide, VAT-Exempt Transactions Under NIRC Section 109. This post goes deep on the agricultural and marine food category alone, since it is the one most small food sellers and market vendors actually deal with day to day.

What counts as “original state,” and where is the line? #

The law does not require a product to be literally untouched — Section 109(A) and its implementing regulations treat a defined list of simple processes as still leaving a product in its original state, so long as nothing beyond that list has been done to it. The statute’s own clarifying language is explicit about which processes don’t disqualify a product:

“Products classified under this paragraph 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, broiling, roasting, smoking or stripping.”

Revenue Regulations No. 16-2005, which implements this provision, applies the same test to specific commodities: polished and/or husked rice, corn grits, raw cane sugar, molasses, ordinary salt, and copra are all treated as agricultural products in their original state. Marine food covers fish and crustaceans generally — including eels, trout, lobster, shrimp, prawns, oysters, mussels, and clams — sold fresh, chilled, frozen, dried, salted, or smoked. The BIR has also confirmed in ruling practice that roasting is one of the listed simple processes, so a seller of take-out roasted chicken can still fall under the exemption even though the chicken is cooked, because roasting itself doesn’t take the product past “original state.” What does cross the line is processing that adds ingredients or transforms the product into something structurally different — marinating with seasoning blends, breading, canning with sauce or oil, or milling raw grain into flour are treated as going beyond the enumerated simple processes, which is why sellers of those items are VAT-covered even though the raw input started out exempt.

Which everyday products are exempt, and which cross into VATable territory? #

The practical dividing line for a food seller is whether the product has only been cleaned, cut, chilled, frozen, dried, salted, or similarly prepared for market, or whether it has instead been transformed into a new product through milling, refining, or added-ingredient processing. The table below applies that test to products a typical market vendor, farm supplier, or small food producer handles:

Two site posts already cover the milling/refining side of this line in depth: flour is VATable because it is the product of an industrial wheat-milling process, and millers instead pay advance VAT on the wheat under RR No. 29-2003 (see Advance VAT on Flour); refined sugar is likewise VATable, with advance VAT computed on a fixed per-bag base price under RR No. 6-2015 (see Advance VAT on Refined Sugar). Both are useful contrast cases: the raw agricultural input (wheat, cane sugar) isn’t itself the exempt item sold at retail — it’s the finished, unprocessed-beyond-simple-methods product (milled rice, raw cane sugar) that qualifies, while the industrially processed downstream product does not.

Worked example: a wet-market vendor with mixed product lines #

A single vendor can carry both exempt and VATable product lines in the same stall, and only the VATable sales count toward VAT registration and output VAT liability. Consider Aling Fely, who runs a stall at a public market selling four product lines in a typical month:

Aling Fely’s exempt sales (₱180,000 + ₱150,000 + ₱60,000 = ₱390,000/month) are excluded from the VAT-registration threshold computation entirely, no matter how large they grow, because Section 109(A) sales are not counted toward the ₱3,000,000 threshold in the first place. Only her marinated and breaded chicken cutlet line — ₱90,000/month, or ₱1,080,000/year — is a VATable sale. Since that VATable line alone is well below the ₱3,000,000 VAT-registration threshold, Aling Fely is not required to VAT-register on the strength of her current sales mix; she would instead be subject to percentage tax on that VATable line under BIR Form 2551Q. If her breaded-chicken line grew past the threshold on its own, she would need to register for VAT and begin charging 12% output VAT on that product line specifically — while her fresh fish, live/frozen poultry, and smoked fish sales would remain exempt and outside the VAT system regardless of volume. This is why a mixed-product vendor needs to track each product line’s tax treatment separately rather than applying one blanket rule to the whole business.

Frequently asked questions #

Is selling fresh fish or vegetables VAT-exempt in the Philippines? #

Yes. Under NIRC Section 109(A), the sale of agricultural and marine food products in their original state — including fresh fish, vegetables, fruits, and unprocessed meat — is exempt from the 12% value-added tax, regardless of who sells them or in what volume.

Does cooking or roasting a food product remove its VAT exemption? #

Not automatically. NIRC Section 109(A) treats simple processes of preparation or preservation — freezing, drying, salting, broiling, roasting, smoking, or stripping — as still leaving a product in its “original state.” The BIR has confirmed in ruling practice that take-out roasted chicken, for example, remains VAT-exempt on that basis, while products that undergo more involved manufacturing lose the exemption.

Is milled rice VAT-exempt, but flour is not? #

Yes. Polished or husked rice is treated as an agricultural product in its original state and is VAT-exempt. Flour, by contrast, is the product of milling wheat through an industrial process well beyond simple preparation, so its sale is VATable — millers instead pay advance VAT on the wheat itself under Revenue Regulations No. 29-2003.

Is raw sugar VAT-exempt while refined sugar is VATable? #

Generally yes. Raw cane sugar is treated as an agricultural product in its original state. Refined sugar has gone through industrial processing beyond the simple processes the law allows, so its sale is VATable, and Revenue Regulations No. 6-2015 requires advance VAT on refined sugar computed on a fixed base price before it leaves a refinery or mill.

Does a vendor selling only VAT-exempt agricultural products still need to register for VAT? #

Not because of those sales alone. Sales of agricultural and marine food products in their original state are excluded from the VAT-registration threshold computation. A vendor who sells exclusively exempt products generally does not need to VAT-register on account of those sales, though other taxable sales the same business makes are counted separately.

Summary #

NIRC Section 109(A) exempts agricultural and marine food products, livestock, and poultry from VAT only while they remain in their “original state” — a status the law preserves through simple processes like freezing, drying, salting, broiling, roasting, smoking, or stripping, but loses once a product is milled, refined, canned, or processed with added ingredients. Milled rice, raw cane sugar, fresh or smoked fish, and live or roasted poultry stay exempt; flour, refined sugar, canned goods, and marinated or breaded products cross into VATable territory, as the site’s companion posts on advance VAT on flour and advance VAT on refined sugar detail for those two specific commodities. A mixed-product seller should classify each product line on its own facts rather than assuming one blanket rule for the whole business — see the full list of Section 109 exemptions in VAT-Exempt Transactions Under NIRC Section 109 for how this category fits alongside the others.