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Lecture 6 - Value-Added Tax
Lecture 6 - Value-Added Tax
I. Pro-Forma Computation
Output VAT from regular Domestic Sales and Receipts (limit P 1,919,500) xx
Output VAT from Importation (paid prior to release from Customs) xx
Output VAT from Deemed Sale Transactions xx
Output VAT from Zero-Rated Sales xx
xx
Less:
Input VAT from Purchases of Goods (xx)
Input VAT from Importation (xx)
Input VAT from Purchases of Services (xx)
Input VAT from Deemed Sale Transactions (if not previously claimed) (xx)
Input VAT from Depreciable Capital Goods (xx)
Input VAT from TIV/ Presumptive (xx)
VAT Payable xx
1. A VAT is a tax levied on the value of the products of an enterprise in the course of its production and
distribution. It is otherwise known as the tax on Mark-ups.
2. It is a percentage tax imposed at every stage of the transfer of goods on sale, exchange, barter, and the
importation of goods, including transaction deemed by law as a sale or leasing of goods or property and the
performance of services in the course of trade or business.
3. It is based on the gross selling price or gross value in money or net sales when there are sales discounts
or sales returns, whichever is applicable, of the goods or property sold, bartered, or exchanged or the gross
receipts dervied from the sale or exchange of services, including the lease of goods or property, or in the case
of imported goods, on the total value of importation or its landed cost plus excise and ad valorem tax
and other charges on importation.
2. Sale of goods
Tax base of VAT on sale of goods or properties
v. Other amounts due from buyer such as for packaging, delivery and insurance.
b. Sales discount granted and indicated in the invoice at the time of sale and the grant of which
does not depend upon the happening of future event may be excluded from gross sales within the
same month or quarter it was given.
c. Sales returns and allowances may be deducted from the gross sales for the month or quarter in
which a refund is made or a credit memo is issued.
d. Excise tax (a business tax), if any, is included in the gross sales, while VAT is excluded.
3. Sale of Properties
1. Sale of real property classified as capital asset is not subject to VAT. Such transaction is subject to
capital gains tax of 6% based on sales price or FMV, whichever is higher.
2. In general, sale of real property primarily held in the normal course of business (inventory/ordinary asset)
is subject to VAT, except:
a. Residential lot with selling price of P 1,919,500 and below; and
b. Sale of house and lot and other residential dwellings with selling price at P 3,199,200 and below.
d. On cash basis or deferred payment plan (initial payments exceed 25% of the gross selling price)
The tax base shall be the higher between SELLING PRICE stated in the sales document and ZONAL
OR MARKET VALUE.
Notes:
a. If the gross selling price is the zonal or market value of the real property, the zonal or market value
shall be deemed inclusive of the VAT.
b. If the VAT is not billed separately, the selling price stated in the sales document shall be deemed
inclusive of the VAT.
5. Sale of Service
a. In general, all kinds of sale, exchange or supply of services rendered in the Philippines are subject to 12%
VAT, except those which are classified and qualified as zero-rated or VAT-exempt.
b. Under the situs of service criteria services performed outside the Philippines, even if undertaken in the
course of business, are BEYOND the scope of VAT.
c. Tax Base:
i. Total amount of money or its equivalent representing the contract price, compensation service fee,
rental or royalty.
ii. Amount charged for materials supplied, with the services and deposits and advance payments actually
or constructively received during the taxable quarter, excluding VAT.
LECTURE 6:VALUE-ADDED TAX
Also, aside from VAT is subject to 10% creditable withholding tax if the aggregate amount per year is
P720,000 and below, and 15% creditable withholding tax if exceeding P720,000.
b. Consignment of goods if not sold within 60 days following the date of consignment;
c. Distribution or transfer to creditors in payment of debt or dacion en pago;
d. Distribution or transfer to shareholders or investors as share in the profit; and
e. Retirement from or cessation of business or incorporation of single proprietorship with respect to all goods
on hand, whether capital goods, stock in trade, supplies or materials, as of the date of such retirement,
cessation or incorporation,
Notes: The tax base for deemed sale transactions would be the lower of (a) acquisition cost or (b) the
current market price. Where the gross selling price is unreasonably lower than the actual market value,
the appropriate tax base shall be determined by the Commissioner. The gross selling price is
unreasonably lower than the actual market value if it is lower by more than 30% of the actual market
value of the same goods of the same quantity or quantity sold in the immediate locality on the the nearest
date of sale.
f. Transfer of assets as a result of merger or consolidation are not considered as deemed sale transaction.
However, the unused input tax of the dissolved corporation, as of the date of merger or consolidation, shall
be absorbed by the surviving corporation.
7. Zero-Rated Sales
a. Export Sales
i. The sale and actual shipment of goods from the Philippines to a foreign country.
ii. Sale of raw materials or packaging materials to a nonresident buyer for delivery to a resident local
export-oriented enterprise.
iii. Sale of raw materials or packaging materials to export-oriented enterprises whose export sales
exceed 70% of total annual production.
iv. Sale of gold to the Bangko Sentral ng Pilipinas.
v. Those considered export sales under the Omnibus Investment Code of 1987 (E. O. No. 226) and
other special laws, e.g., sales to diplomatic missions and other agencies and/or instrumentalities
granted tax immunities.
vi. Sale of goods, supplies, equipment and fuel to persons engaged in international shipping or
international air transport operations.
2. Purchase of Services
3. Purchase of Capital Goods
Claim for input tax on depreciable goods
a. Applies only to domestic purchase or importation of capital goods subject to depreciation for
income tax purposes.
b. Where the aggregate acquisition cost (exclusive of VAT) of depreciable capital goods during any
calendar month does not exceed P1,000,000, the total input tax is creditable against output tax in
the month acquired (Outright Credit)
c. Where the aggregate acquisition cost (exclusive of VAT) of depreciable capital goods during any
calendar month exceeds P1,000,000, the total input tax is creditable against output tax, as follows:
i. Spread evenly over 60 months (starting in the calendar month acquired) the input tax, if the
estimated useful life of the depreciable capital good is 5 years or more.
ii. Spread evenly over the actual number of months of estimated useful life (starting in the
calendar month acquired) the input tax, if the estimated useful life of the depreciable
capital good is less than 5 years.
d. If the depreciable capital good is sold or transferred within a period of 5 years or prior to the
exhaustion of the amortizable input tax thereon, the entire unamortized input tax on the capital
good sold or transferred can be claimed as input tax credit in the month/quarter when the sale or
transfer was made.
4. Zero-Rated Sales
a. The input VAT may at the option of the taxpayer, be claimed for (a) tax refund, the claim of which
shall be filed and made within 2 years from the close of the quarter when such sales are made, or (b)
tax credit against internal revenue taxes.
a. The sale to Government or its political subdivision by VAT-registered person shall be subject to 12%
VAT, provided that:
i. The government shall withhold 5% final withholding VAT upon payment to the VAT registered
person;
ii. The VAT-registered person may claim a Standard Input VAT of 7% against its output VAT
from the sale to government. The Actual Input VAT attributable to sales of goods and services
to the government shall not be credited against the Output vat arising from sales to non-
government entities.
b. If the input tax at the end of any taxable quarter (inclusive of input tax carried over from the previous
quarter) exceeds the output tax, the excess input tax (current asset) shall be carried over to the
succeeding taxable month or quarter, provided that any input tax attributable to 0-rated sales by a
VAT-registered person may at his option be refunded or applied for a tax credit certificate.
3. Where to file the return and pay the tax - In any one of the following located within the revenue district
where the taxpayer is registered or required to register:
a. Authorized agent bank
b. Revenue collection officer
c. Duly authorized city or municipal treasurer