VAT- SUBJECT TRANSACTIONS VAT-Subject Transactions Transactions 1. Sales of goods or properties in the course of trade or business 2. Sale of services and lease of properties in the course of trade or business 3. Importation (subject to VAT regardless regardles s of the purpose whether for business or not) In the course of trade or business defined
Tax Base Gross Selling Price Gross Receipts Total Land Cost
The phrase In the course of trade or business means the regular conduct or pursuit of a commercial or an economic activity including transactions incidental thereto, by any person re gardless of whether or not the person engaged therein is a non-stock, non-profit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members on t heir guests) or government entity. The rule of regularity to the t he contrary notwithstanding, services as defined in the Tax Code rendered in the Philippines by non-resident foreign persons shall be considered as being in the course of trade or business. Goods or Properties The term “goods or services” refers to all tangible and intangible objects which are
capable of pecuniary (monetary) estimation . Sale or Exchanges of services
It means the performance of o f all kinds of services in the Philippines for others for a fee, remuneration or consideration, whether in kind or cash.
Computation of VAT Payable (Excess input tax)
a. Output Tax exceeds input tax at the end of any taxable period
Output Tax
xxx
Less: Input Tax
(xxx)
VAT Payable
xxx
b. Input Tax inclusive of input tax carried over from the previous quarter exceeds output tax
Output Tax
xxx
Less: Input Tax
(xxx)
VAT Payable
(xxx)
Transaction a. Sale of goods
b. Sale of real properties on installment plan (initial payment do not exceed 25% of the gross selling price)
Computation of the Tax Base and the A pplicable Tax Rates Tax Based Gross Selling Price Gross Sales Less: Sales return and allowances Sales Discount Net Sales Add: Excise Tax, if any Tax Base (excluding VAT) Installment received Add: Interest Payment for late payment Tax Base
Tax Rate 12% or 0% xxx xxx xxx
xxx xxx xxx xxx xxx xxx xxx
12% or 0%
xxx xxx
TAX 2 – VAT EXEMPT TRANSACTIONS; SOURCES: TEXTBOOKS BY BANGGAWAN, AMPONGAN AND DE VERA; AND VARIOUS CPA REVIEW MATERIALS PREPARED BY: JULIUS A. VITAO, CPA INSTRUCTOR, TARLAC CHRISTIAN COLLEGE
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c. Sale of real properties on installment plan
Selling price stated in the sales documents or fair market value, whichever is higher.
(initial payments exceed 25% of the gross selling price)
d. Sales of services
Gross receipts computed as follows: Cash received (actually and constructively) Advance payments for future projects Materials charged with the services Gross receipts (excluding VAT)
xxx xxx xxx xxx
Note: Receivables, although earned, are not included.
e. Gross receipts for dealer in securities
f. Gross receipts on the sale of electricity by generation, transmission and distribution companies
g. Importation
Gross receipts computed as follows: Gross Selling Price Less: Acquisition Cost of Securities Sold for the month or quarter
xxx xxx xxx xxx xxx
Balance Add: Other or incidental income Gross receipts (excluding VAT) Gross receipts shall refer to the following: a. Total amounts charged by generation, companies for t he sale of electricity and related ancillary services; b. Total amount charged by transmission companies for transmission of electricity and related ancillary services; c. Total amount charged by distribution companies and electric cooperatives for distribution and supply of electricity and related electric service. The universal charged passed o n and collected shall be excluded from the computation of the Gross Receipts. a. In general Total value xxx Add: Custom duties xxx Excise Tax xxx Other charges prior to release of goods from customs custody
xxx
Tax Base
xxx
xxx
b. In case where customs duties is based on volume or quantity Total landed cost xxx Add: Excise Tax xxx Tax Base xxx
TAX 2 – VAT EXEMPT TRANSACTIONS; SOURCES: TEXTBOOKS BY BANGGAWAN, AMPONGAN AND DE VERA; AND VARIOUS CPA REVIEW MATERIALS PREPARED BY: JULIUS A. VITAO, CPA INSTRUCTOR, TARLAC CHRISTIAN COLLEGE
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OUTPUT VAT -
It means the value-added tax on sale or lease or taxable goods or properties or services by any person registered r required to register.
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In sale of goods or properties, the output tax is computed by multiplying the gross selling price by the regular rate of VAT.
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Tax payers who exceeded the threshold (P1,919,500), are subject to VAT, whether VAT registered or not. However, only VAT registered taxpayers can claim input tax.
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Selling price + VAT = Total Invoice Price
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If it is said to be that the Selling Price is before VAT, net of VAT, exclusive of VAT, or simply sales per book simply multiply to 12%.
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If the selling price is said to be after VAT, gross of VAT, inclusive of VAT, or simply Total invoice price, use 12/112 as your multiplier to get the amount of VAT.
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Examples: Selling Price, net of VAT, P120,000
VAT= 14,400
Selling Price, gross of VAT, P240,000
VAT = 25,714.29
Sales per book, P100,000
VAT = 12,000
Selling Price including erroneous VAT, P110,000 VAT= 11,785.71 SOURCES OF OUTPUT TAXES Sale of goods or properties a. Actual Regular Sales b. Actual Zero-rated Sales c. Deemed Sales
Sale of services and lease if properties a. Actual Regular Sales b. Actual Zero-rated Sales
A. ZERO RATED SALES - a zero rated sales of goods or properties and services (by a VAT Reg istered Services) is a
taxable transaction for VAT purposes, but shall not result to any output tax. However, the input tax on purchases of goods, properties or services, related to such zero-rated sale, shall be available as tax credit or refund in acco rdance with the regulations. - example of zero-rated sales are: export sales, foreign currency denominated sales and
effectively zero-rated sales. 1. Export Sales Export Sale of goods or properties 1. The sale and actual shipment of the goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported; 2. Sale of raw materials or packag ing materials to a non-resident buyer for delivery to a resident local export oriented enterprise to be used in the manufacturing, processing, packing
Export Sale of services and lease of properties 1. Processing, manufacturing or repacking of goods for other persons doing business outside the Philippines which goods are subsequently exported; 2. Services other than processing, manufacturing or repacking rendered to a person engaged in business conducted outside the Philippines or to a non-resident person not engaged in business who s outside the Philippines when the service are performed;
TAX 2 – VAT EXEMPT TRANSACTIONS; SOURCES: TEXTBOOKS BY BANGGAWAN, AMPONGAN AND DE VERA; AND VARIOUS CPA REVIEW MATERIALS PREPARED BY: JULIUS A. VITAO, CPA INSTRUCTOR, TARLAC CHRISTIAN COLLEGE
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and repacking in the Philippines in the said buyer’s goods; 3. Sale of raw materials or packag ing materials to export-oriented enterprise whose export sales exceed 70% of the total annual production; 4. Sale of gold to Bangko Sentr al ng Pilipinas 5. Those considered export sales under the Omnibus Investment Code of 1987 and other special laws. 6. The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international transport operations. Omnibus Code of 1987 “Considered export sales under EO No. 226”: a. The Philippine port FOB value determined from invoices, bills of lading, inward letters of credit, landing certificates, and other commercial documents, of export products exported directly by a registered export producer, or b. the net selling price of export products sold by a register export producer to another export producer, or to an export trader that subsequently exports the same. 2. Foreign Currency Denominated Sales
3. Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent rate; 4. Services rendered to persons engaged in international shipping or air transport operations, including lease of property for use thereof; 5. Services performed by subcontractors and/or contractors in processing, converting or manufacturing goods for an enterprise whose export sales exceed 70% of the total annual production; 6. Transport of passengers and cargo by domestic air or sea carriers from the Philippines to a foreign country; 7. Sale of power or fuel generated through renewable sources of energy. Provided, however, that zero-rating shall not extent to the sale of services related to the maintenance or operation of plants generating said power.
- means the sale to a non-resident of goods, except those metioned in Secs. 149 and 150 of the
Tax Code (Automobile and Non-Essential Goods, respectively), assembled or manufactured in the Philippines for delivery to a resident in the Philippines, paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP.
Sale of locally manufactured or assembled goods for household and personal use to Filipinos abroad and other non-residents of the Philippines as well as returning Overseas Filipinos under the Internal Export Program of the Government paid for in convertible foreign currency and accounted for in accordance with the rules and regulations of the BSP shall also be considered export sales. 3. Effectively Zero-Rated Sales
- sale of goods or property or services to persons or entities who are tax exempt under international agreements to which the Philippine is signatory, such as, Asian Development B ank, International Rice Research Institute, etc., shall be effectively subject to VAT at zero-rate. B. DEEMED SALE TRANSACTION
1. Transfer, use or consumption not in the course of trade or business of goods and properties originally intended for sale or use in the course of trade or business; TAX 2 – VAT EXEMPT TRANSACTIONS; SOURCES: TEXTBOOKS BY BANGGAWAN, AMPONGAN AND DE VERA; AND VARIOUS CPA REVIEW MATERIALS PREPARED BY: JULIUS A. VITAO, CPA INSTRUCTOR, TARLAC CHRISTIAN COLLEGE
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2. Distribution or transfer to shareholders or investors as share in the profits of VAT-registered person; 3. Distribution or transfer to creditors in payment of debt or obligation; 4. Consignment of goods if not sold within 60 days following the date of the consignment; 5. Retirement from or cessation of business with respect to all goods on hand, whether capital goods, stock-in-trade, supplies or materials as of the date of such retirement or cessation, whether or not the business is continued by the new owner or successor. Notes: a. In cases 1 to 4, the tax base is the market value. b. In case 5, the tax base is the lower between acquisition cost or market value. The Commissioner of Internal Revenue shall determine the appropriate tax base where the gross selling price is unreasonably lower than the actual market value (lower by more than 30% of t he actual market value). Sale, Transfer, or Exchange of Imported Goods by Tax-Exempt Persons
a. In the case of goods imported into the Philippines by VAT-exempt persons, entities, or age ncies which are subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the latter shall be considered the importers thereof who shall be liable for VAT on such importation. b. The tax due on such importation shall constitute a lien on the goods, superior to all charges or liens, irrespective of the possessor the said goods.
TAX 2 – VAT EXEMPT TRANSACTIONS; SOURCES: TEXTBOOKS BY BANGGAWAN, AMPONGAN AND DE VERA; AND VARIOUS CPA REVIEW MATERIALS PREPARED BY: JULIUS A. VITAO, CPA INSTRUCTOR, TARLAC CHRISTIAN COLLEGE
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