BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 41

SUGGESTED ANSWERS
Chapter 8: BUSINESS TRANSACTIONS

CHAPTER 8
BUSINESS TRANSACTIONS
Problem 8–1
1. False – Some business transactions are VAT-exempt.
2. True
3. True
4. True
5. True
6. True
7. False – Zero rated sales are applicable only to VAT-registered business/person.
8. True
9. True
10. False – Sales of non-VAT person, exceeding P1,500,000 per year is also subject to VAT.

Problem 8–2
1. True
2. False – The exemption pertains only to Output VAT.
3. False – Zero VAT transactions are not applicable for non-VAT registered persons.
4. False – Some VAT taxable transactions have no Input VAT especially if the supplier is a non-
VAT person.
5. False – Exempt from business tax because it is considered as a subsistence livelihood.
6. True
7. False – Exempt from VAT.
8. False – zero VAT.
9. False – VAT-exempt.
10. True

Problem 8 – 3 Problem 8-4

1. B 1. B
2. D 2. B
3. C 3. A
4. B 4. B
5. C 5. C
6. A 6. A
7. C 7. C
8. C 8. B

Problem 8 – 5 C
Domestic sales P2,000,000
Importation of goods 500,000
Total VAT taxable transactions P2,500,000

Problem 8 – 6 C
Output VAT from collections (P4,480,000/9.3333) P480.000
Input VAT from supplies used (P560,000/9.3333) 60,000
VAT payable P420,000

Problem 8 – 7 D
No zero-rated transactions because the taxpayer is non-VAT.
BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 42
SUGGESTED ANSWERS
Chapter 8: BUSINESS TRANSACTIONS
Problem 8 – 8 C
Output VAT (P2,000,000 + P12,000,000) x 12% P1,680,000

The output VAT is the net VAT payable because the business is non-VAT, hence, no input VAT is
allowed.

Problem 8 – 9 A
Passenger by sea 1,500,000
Cargo by land 500,000
Cargo by sea 500,000
Total VAT taxable transactions P2,500,000

Problem 8 – 10 C
Domestic sales P 500,000
Importation of goods 100,000
VAT taxable transactions P 600,000

Problem 8 – 11 C
Export sales P1,000,000

Problem 8 – 12
1. Output VAT (P134,400/9.3333) P14,400
Input VAT (P112,000/9.3333) (12,000)
Business tax liability of X P 2,400

2. Percentage tax (P112,000/1.12) x 3% P 3,000

Output VAT (P112,000/9.3333) 12,000
Surcharge (P12,000 x 50%) 6,000
Business tax liability of Y P21,000

Problem 8 – 13
1. Sales from:
Local government units (P940,000/1.06) P886,792
University of the Philippines (P564,000/1.06) 532,075
Department of Tourism (P282,000/1.06) 266,038
Total sales P1,684,905

Note: The total withholding per sales was 6% comprising 5% final withholding VAT
and 1% creditable withholding income tax.

2. Total income tax withheld (P1,684,905 x 1%) P16,849

3. Total final VAT withheld (P1,684,905 x 5%) P84,245

Problem 8 – 14
1. VAT-registered
Transport of passengers by sea P2,000,000
Transport of cargoes by:
Land 500,000
Sea 1,000,000
VAT taxable transactions P3,500,000

2. Non-VAT registered
Transport of passengers by sea P2,000,000
Transport of cargoes by:
Land 500,000
BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 43
SUGGESTED ANSWERS
Chapter 8: BUSINESS TRANSACTIONS
Sea 1,000,000
VAT taxable transactions P3,500,000

Note: The said non-VAT registered business shall now be subject to VAT because its total gross
receipts exceed P1,500,000. The gross receipts from transport of passengers, however, shall
remain subject to percentage tax.

Problem 8 – 15
1. VAT-registered
From radio ads P 5,000,000
From TV ads 6,000,000
VAT taxable transactions P11,000,000

2. Non-VAT registered
From radio ads P 5,000,000
From TV ads 6,000,000
VAT taxable transactions P11,000,000

Note: A non-VAT registered franchise grantees of radio and television broadcasting with annual
gross receipts of more than P10,000,000 is subject to VAT.

Problem 8 – 16
Output VAT – Zero rated because foreign denominated sales P - 0 -
Input VAT (P336,000/9.3333) ( 36,000)
VAT refund (P 36,000)

Problem 8 – 17
Domestic sales to various VAT person P 800,000
Domestic sales to various non-VAT person 600,000
VAT taxable transactions against X P1,400,000

Problem 8 – 18
1. P - 0 -
The business is non-VAT and total sales do not exceed P1,500,000/year

2. P -0-
No zero-VAT sale is allowed for a non-VAT business.

3. Domestic sales to various VAT persons P 50,000

Domestic sales to various non-VAT persons 100,000
Export sales denominated in foreign currency 200,000
Total VAT-exempt sales P350,000

Problem 8 – 19
1. VAT-registered P 2,000,000
Domestic sales 2,000,000
Export sales 3,000,000
Total value of sales allowed with creditable Input VAT P 5,000,000

2. Non-VAT registered
a. Domestic sales – VAT taxable sales P 2,000,000

b. Zero-rated sales P - 0 -

c. Export sales – VAT-exempt sales of a non-VAT business P 3,000,000