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128 October 19

*ASSIGNMENT: make a table 0% zero-rated vs VAT exempt

*Exams:

(1) Transfer taxes
(2) VAT | OPT | Excise
(3) Special | local government tax

What is VAT?

Who is liable for VAT?
Sec 4.105-1 to 3
 GOCCs and NPOs still liable, as long as engaged in trade
 Ex. Company X manufactures shoes to be sold to Company A. Company X has a truck which it
uses to deliver the shoes as well, and also sold this to A.
o Jurisprudence provides that the truck is considered incidental to the business (basta
used for the main business) and thus the sale of the truck is subject to VAT
 Ex. Foreign company offering services, as long as at any time (kahit once) rendered service in the
PH,
 VAT on importation: importer is liable

How much is VAT? How much is the GSP inclusive of VAT? How much is GSP net of VAT?
P10,000 x 0.12 = 1,200 vs. P11,200 vs. P10,000

Types of VAT
12%
 Transactions must exceed 1,919,500 PER YEAR

Company X seller Company A (VAT-registered – claim input VAT)
Dr. Cash 11,200 Dr. Asset 10,000
Cr. Sales 10,000 Dr. Input VAT 1,200
Cr. Output VAT 1,200 Cr. Cash 11,200

Dr. Input VAT 1,000 If not VAT-registered buyer,
= 200 is VAT payable buyer cannot claim input VAT = 1,200 VAT payable

0% Zero-rated
 Taxable for VAT but no output VAT
 Input tax will be available as tax credit or refund

Company X seller (VAT-registered)
Dr. Cash 10,000
Cr. Sales 10,000
Cr. Output VAT 1,200
Dr. Input VAT 1,000
= 0 VAT payable but input VAT is claimable as tax credit or refund after 2 years

Zero-rated GOODS: SEC 4.108-2
(a) Exports SEC 4.106-5 in RR13-2018
Raw materials
(b) Foreign currency denominated sales in accordance with BSP rules and regulations
 Sale of gold to BSP: dati zero-rated, now NOT
(c) Effectively zero-rated transactions
 "effectively zero-rated sale of goods and properties" shall refer to the local sale of goods and
properties by a VAT-registered person to a person or entity who was granted indirect tax
exemption under special laws or international agreement

SERVICES
Company X provides services for A (foreign company, but has branches in PH). Is the service VAT-able? SEC 4.108
(B)(2) says services 0% only if totally not engaged in business in the Ph – so this is not 0%.

Transactions deemed sale
(1) If Company X, manufacturer of shoes sells shoes to shareholders, deemed sale = subject to VAT
(2) If Company X has already ceased operations but has remaining inventory, sale of such = subject to VAT
(3) If Company X is a sole prop and the sole proprietor uses the shoes, for personal use = subject to VAT
(4) If Company X consigns goods with A and goods are not sold within 60 days, deemed sale = subject to VAT

VAT exempt entity
Ex. Registered with PEZA
 Not allowed to credit input VAT