7/25/2020

and

INTRODUCTION TO BUSINESS TAXES

1. Definition and nature of business taxes

2. Marginal income earners
3. Self-employed and/or professionals
4. Types of business taxes

T 5. Value-added tax (VAT) defined

O 6. Persons liable to VAT
P 7. Characteristics of VAT
I 8. Basis of output VAT
C 9. Sale of goods and services to PWDs and
S Senior Citizens
10. Mandatory, Optional and Cancellation of
VAT registration
11. Other percentage and excise taxes,
definition and nature

DEFINITIONS

Business Taxes
 Are those imposed upon onerous transfers such
as sale, barter, exchange and importation.
 Tax imposed are generally based on gross sales
or gross receipt.
 Irrespective of the result of business operations
(income or loss), taxpayers engaged in
trade are still liable to pay for the business taxes.
 Tax in the Philippines composed of the following:
a) Value-added tax
b) Other percentage tax
c) Excise taxes

1
 7/25/2020

TYPES OF
BUSINESS TAXES

 Tax in the Philippines composed of the

following:
a) Value-added tax
b) Other percentage tax
c) Excise taxes

DEFINITIONS

Marginal Income
Earners

 those individuals whose business do not

realize a gross sales or receipts exceeding
P100,000 in any twelve-month period, thus
not subject to business taxes (RR 7-2012).

VALUE-ADDED TAX

 Is a tax on the value added by every seller

to the purchase price or cost in the sale or
lease of goods, property or services in the
ordinary course of trade or business as well
as on importation of goods into the
Philippines, whether personal or business
use.
 It is a tax on consumption levied on the sale,
barter, exchange or lease of goods or
properties and services in the Philippines.

2
 7/25/2020

KINDS OF VAT

1. VAT on sale of goods or properties

2. VAT on importation of goods
3. VAT on sale of services and use or
lease of properties

NOTE: “Cross border doctrine” – MEANS THAT NO VAT SHALL

BE IMPOSED TO FORM PART OF THE CVOST OF GOODS
DESTINED FOR CONSUMPTION OUTSIDE THE TERRITORIAL
BORDER OF THE PHILIPPINE TAXING AUTHORITY.

CHARACTERISTICS OF VAT

1. It is an indirect tax where tax shifting

is always presumed.
2. It is consumption-based
3. It is imposed on the value-added in
each stage of production and
distribution process.
4. It is a credit-invoice method value –
added tax

PERSONS LIABLE TO VAT

1. Any person who in the course of his

trade or business, sells, barters,
exchangesor leases goods or properties
or renders service.
2. Any person or corporation who engaged
in the importation of taxable goods
3. Transfer made by a tax-exempt entity to
none-tax exempt entity

3
 7/25/2020

BASIS OF VALUE-
ADDED TAX (RA 9361)

Nature of transactions Tax base

Sale of goods or Gross selling price

properties

Sale of services Gross receipts

Importation Total landed cost

Dealers in securities Gross income

SALE OF GOODS

Gross sales xxx

Less : Sales discount xx
Sales returns xx xx
Net sales xxx
Add: Excise tax, if any xx
Tax base xxx
VAT rate 12%
Output VAT xxx
Less: Input VAT xx
VAT payable xx

SALE OF SERVICES

Cash received (actually & constructively) xxx

Deposits/advance payments for
future projects xxx
Materials charged for services xxx
Gross receipts xxx
VAT rate 12%
Output VAT xxx
Less: Input VAT xx
VAT payable xx

NOTE: Receivables for sale of services, although earned,

are not included in the computation of VAT payable

4
 7/25/2020

DEALER IN SECURITIES
& LENDING INVESTORS

Gross selling price xxx

Less: Acquisition cost of securities
sold for the month or quarter xxx
Balance xxx
Add: Other income or incidental income xxx
Gross income xxx
VAT rate 12%
Output VAT xxx
Less: Input VAT xx
VAT payable xx

OTHER PERCENTAGE
TAXES (OPT)

 A tax imposed on sale, barter, exchange

or importation of goods or sale of services
based upon gross sales, value of money of
receipts derived by a manufacturer,
producer, importer or seller measured by
certain percentage of the gross selling price
or receipts.

EXCISE TAXES

 in addition to VAT, excise taxes apply to

goods manufactured or produced in the
Philippines for domestic sales or
consumption or other disposition and goods
imported, classified under the Tax Code as
either:
1. “sin” products.
2. non-essential goods

5
 7/25/2020

TYPES OF
EXCISE TAXES

1. SPECIFIC TAXES

• Excise taxes based on the weight,

volume, capacity or any other physical
unit of measurement of the goods.

2. AD VALOREM TAXES
• Excise taxes based on the selling price or
other specified value of the goods

PURPOSE OF IMPOSING
EXCISE TAXES

1. To curtail consumption of certain commodities

which are considered as harmful to the
individual or community
2. To protect domestic inductries from
competition posed by imported products
3. To distribute the tax burden in proportion to
benefit derived from a particular government
service