CHAPTER 10:

DETERMINATION OF
VAT STILL DUE
Prepared by: Carl Justine T. Maniago, CPA
DETERMINATION OF VAT STILL DUE

 Tax Credits/Payments
 VAT paid in the previous two months – for quarterly VAT returns
 VAT paid in return previously filed, in the case of amended return
 Advanced payments made to the BIR
 Final withholding VAT on sales to the government
 Advanced VAT on certain goods
ADVANCED VAT

 The owners or sellers of the following goods are required to pay advanced
VAT before their withdrawal at the point of production:
 Refined Sugar
 Flour
 Naturally grown and planted timber products

 Advanced VAT is not an input VAT and not included as part of the
allowable input VAT. However, unutilized advanced VAT in the period may
form part of the Input VAT Carry-Over.
ADVANCED VAT:
SALE OF SUGAR
 Sugar – refers to sugar other than raw cane sugar or those with sugar
content of sucrose by weight, in the dry state corresponds to a polarimeter
reading to 99.5 degrees and above and whose color is 800 ICU or less.

 Before any warehouse receipts or quedans are issued or before the sugar is
withdrawn from the sugar mill/refinery, the advanced VAT shall be paid by
the owner/seller to the BIR.

 Sugar owners refer to persons who have legal title over the sugar and may
include sugar planters, traders, sugar millers, cooperatives, or association.

 Base price of advanced VAT: P1,400 per 50 kg. bag

ADVANCED VAT:
SALE OF SUGAR
ILLUSTRATION:
Sugarco Company buys sugar cane from farmers, processes it in its refinery and sells
the output to wholesalers. The following relates to its processing and refining activities
during a month:

Purchase of cane sugar from cane farmers P 2,000,000

Refining expenses, including P24,000 VAT 324,000
Total production of 50 kg-bag refined sugar 4,000 bags

The advanced input VAT to be paid prior to the withdrawal of sugar from refinery:
Advanced VAT = 4,000 bags x P1,400 x 12% = P 672,000

Assuming Sugarco was able to sell 3,800 bags at P1,800/bag during the month,
compute the VAT payable.
ADVANCED VAT:
SALE OF FLOUR BY MILLERS
 Flour Miller – a person who is engaged in the milling of imported wheat to produce
flour as finished product, where such wheat may be directly imported or purchased
from an importer/trader.
 Wheat Trader - a person who is engaged in the importing/buying and selling of
imported wheat.
 Importation of wheat by a flour miller
 The advanced VAT on the future sale of flour milled from imported wheat shall be
paid prior to the release from Custom’s custody of the wheat, which is imported
and declared for milling.
 Purchase of wheat by flour millers from traders
 The purchase of imported wheat from traders shall also be subjected to advance
VAT and shall be paid by the flour miller prior to delivery of the wheat by the
trader.
 It must be noted that the importation of wheat, an agricultural food product in
original state, is exempt from VAT. The purpose of the advance VAT is to get an
advanced tax collection from the future sale of flour by millers.
ADVANCED VAT:
SALE OF FLOUR BY MILLERS

BASIS OF THE ADVANCED VAT

 For wheat imported by millers – 75% of the sum of:

 Invoice value multiplied by the currency exchange rate on the date of payment
(a)
 Estimated customs duties and other charges prior to the release of the imported
wheat from Custom’s custody, except for advanced VAT, (b) and
 5% of the sum of (a) and (b)

In short, the advanced VAT is computed as 12% x 75% x 105% x (a + b)

ADVANCED VAT:
SALE OF FLOUR BY MILLERS

BASIS OF THE ADVANCED VAT

 For wheat purchased by flour millers from wheat traders – 75% of the sum of:
 Invoice value (a)
 Estimated freight (b), and
 5% of the sum of (a) and (b)
ADVANCED VAT:
SALE OF FLOUR BY MILLERS
ILLUSTRATION:
A VAT-registered flour miller imported a wheat from abroad at a total invoice price
of $100,000. P300,000 total charges was estimated to be paid prior to the release of the
wheat from Customs. The Peso-Dollar exchange rate at the date of payment was P43.50
to $1.00. Compute the advanced input VAT.
ADVANCED VAT:
TRANSPORT OF NATURALLY GROWN
AND PLANTED TIMBER PRODUCTS
The 12% VAT shall be based on per cubic meter of each species of naturally grown
timber as follows:
Luzon Visayas Mindanao
Phil. mahogany group, Manggasinoro, P1,400 P1,400 P1,425
Manggachapui, Narig, Palosapis, Guijo Groups
Yakal Group 1,500 1,500 1,530
Apitong Group 1,260 1,260 1,260
Softwood Species except Igem 715 715 715
Igem 1,275 1,275 1,275
Nato 1,000 1,000 1,000
Furniture/Construction hardwood 950 950 950
Premium species, allowed cut 3,000 3,000 3,000
Lesser-used 700 700 700
Pulpwood, chip wood & mathwood species 95 95 95
ADVANCED VAT:
TRANSPORT OF NATURALLY GROWN
AND PLANTED TIMBER PRODUCTS

ILLUSTRATION:

Forester Isidro is a VAT registered person and a licensee under a Private Forest
Development Agreement with the government in Kalinga Province in Luzon. He
harvested 1,700 cubic meter of mahogany. Compute the advanced VAT.
OVERPAYMENT

 The resultant “Overpayment” or negative net amount in the VAT return

maybe treated as “Input VAT carry-over” to the succeeding period.

 Alternative Treatment on Certain Overpayments

 Overpayments arising from input VAT on zero-rated sales
 Overpayments arising from advanced input VAT
OVERPAYMENT:
INPUT VAT ON ZERO-RATED SALES
 The unutilized input VAT arising from zero-rated sales or effectively zero-rated sales
may be claimed as
 tax refund
 tax credit against other internal revenue taxes
 Prescriptive period for claim for refund or tax credit
 The two-year prescriptive period for the claim for the refund or tax credit is
counted from the close of the taxable quarter when the zero-rated sales were
made, not from the date of payment of the VAT.
 Perfect matching of input VAT with zero-rated sales not required
 The input VAT reported in past quarter which are attributable to zero-rated sales
reported in subsequent quarters are still claimable as tax credit or tax credit.
 Input VAT claimed for refund or tax credit shall no longer be creditable against
output VAT and must be removed from the total amount of creditable input VAT.
OVERPAYMENT:
UNUTILIZED ADVANCED VAT

 Advanced VAT payment which remained unutilized at the end of the taxpayer’s
taxable year when advanced payment was made, and which is tantamount to
excess payment may, at the option of the owner/seller/taxpayer or
importer/miller/taxpayer, be available for the issuance of a tax credit certificate
(TCC).

 Requisite for TCC claim

 The seller/owner or importer/miller must file a claim for credit within 2 years from
the date of filing the 4th quarter VAT return of the year such return was made.
 Claim shall be limited to the unutilized advanced VAT payment and shall not
include excess input VAT
VAT PAYABLE COMPUTATION
ILLUSTRATION 1:
Danube Corporation reported the following sales and purchases during the third
calendar quarter:

July August September

Sales P 1,100,000 P 1,340,100 P 1,240,000
Unsold consignment sales from:
May 64,800 12,800 -
June 86,200 37,500 -
July 122,800 80,400 48,000
August - 150,000 90,000
Purchases:
Goods, VAT 896,000 1,008,000 784,000
suppliers
Machineries, non- 1,232,000
VAT suppliers
VAT PAYABLE COMPUTATION

ILLUSTRATION 1:

Additional information:
1. The reported sales include direct sales and those made by consignees but
excludes sales of goods previously deemed sold.
2. All amounts are inclusive of VAT

Compute the VAT payable in each month.

VAT PAYABLE COMPUTATION

ILLUSTRATION 2:

A VAT-registered taxpayer had the following sales and purchases during a month.
Compute the VAT payable.

Sales to: Sales, net of VAT Traceable Input VAT

PEZA locators P 900,000 P 48,000
Asian Development Bank 600,000 24,000
Government 100,000 6,000
Private customers 1,400,000 90,000
COMPLIANCE REQUIREMENTS

 Invoicing requirement
 Accounting requirement
 Filing of VAT return
 Filing of quarterly summary lists
 Government withholding
COMPLIANCE REQUIREMENTS:
INVOICING REQUIREMENT
 A VAT-registered person shall issue a:
 VAT invoice for every sale, barter or exchange of goods or properties; and
 VAT official receipt for every lease of goods or properties, and for every sale, barter or
exchange of services.

 A VAT taxpayer may use a single invoice or receipt for mixed sales, provided
 the invoice/receipt must clearly indicate the breakdown of the sales/receipt among
taxable, exempt and zero-rated components; and
 the calculation of VAT on each portion of the sale shall be shown on the invoice/receipt.

 A VAT-registered taxpayer may also use different invoice/receipt for the taxable, exempt,
and zero-rated components of its sales. Provided that:
 if the sale is exempt from VAT, the term VAT-EXEMPT SALE shall be written or printed
prominently on the invoice/receipt
 if the sale is subject to zero percent VAT, the term ZERO-RATED SALE shall be written
prominently on the invoice or receipt.
COMPLIANCE REQUIREMENTS:
ACCOUNTING REQUIREMENT

 All persons subject to VAT shall maintain:

 Regular accounting records
 Subsidiary sales journal
 Subsidiary purchase journal

 The daily transactions of the business are recorded on the subsidiary records.
COMPLIANCE REQUIREMENTS:
FILING OF VAT RETURN
 Who are required to file VAT returns?
 Any person or entity who, in the course of his trade or business, sells, barters,
exchanges, leases goods or properties, and renders services subject to VAT, if the
aggregate amount of actual gross sales/receipts exceeds P3,000,000.
 A person required to register as a VAT taxpayer but failed to register.
 Any person who imports goods, whether or not made in the course of his trade or
business.

 The following are the order of priority where to file the VAT return:
 Authorized agent bank under the jurisdiction of the RDO/LTO where the taxpayer
(head office of business establishment) is required to be registered
 Revenue collection officer
 Duly authorized treasurer of the municipality or city
COMPLIANCE REQUIREMENTS:
FILING OF QUARTERLY SUMMARY LISTS

 Deadline of summary lists of sales or purchases

 These shall be submitted by the taxpayer before the 25th day of the month following
the close of the taxable year.

 Penalties for failure to submit summary list

 Administrative penalty of P 1,000
 The aggregate amount shall not exceed P 25,000
 Willful failure by the taxpayer to keep any record or supply the correct information
at the time or times required shall be subject to criminal penalty upon conviction of
the offender under Tax Code of 1997.
COMPLIANCE REQUIREMENTS:
FILING OF QUARTERLY SUMMARY LISTS

 Cancellation of VAT registration

 The approval of a request for cancellation of VAT registration shall be effective on
the first day of the month following the month of the approval of the cancellation.

 Liability of a non-VAT person who issues a VAT invoice/receipt

 3% percentage tax
 Output VAT charged without the benefit of an input VAT
 50% surcharge (based on the output VAT)
COMPLIANCE REQUIREMENTS:
GOVERNMENT WITHHOLDING

 The legal requirement for the final withholding of VAT shall apply if the
goods or services purchased from VAT suppliers were vatable.