Dacillo, Aileen R.

Summary

Computation of Discount and Amount Due

Vat on the sale of goods and services with sales discounts granted by business establishments to
senior citizens and PWDs shall be computed in accordance with the following formula:

Total sales inclusive of Vat ₱ 1,120

Less: 12% vat; (P1,120 x 3/28) ( 120 )

Total sales exclusive of Vat*** ₱ 1,000

Less: 20% discount*** ( 200 )

Total Amount due ₱ 800

The amount of gross sales or gross receipts to be reported by the seller shall be the undiscounted
amount of P1,000. The discount granted shall be reported as deduction from the gross income of the
seller instead of deducting the same to the amount of gross/sale receipts.

The journal entries in the books of the seller shall be as follows:

Cash ₱800

Senior Citizen/PWD discount expense 200

Sales ₱1,000

Seller is not subject to Vat

The 20% sales discount granted by non-VAT sellers (i.e., subject to 3% percentage tax) shall be
computed in accordance with the following formula:

Total Sales ₱ 1,120

Less: 20% discount ( 224 )
Total sales net of discount ₱ 896

3% Percentage tax (₱1,120 x 3%) ₱ 33.6

 The amount of gross sales or gross receipts to be reported by the seller shall be the
undiscounted amount ₱ 1,120. The discount granted shall be reported in the deduction from the gross
income of the seller instead of deducting the same to the amount of gross sales/receipts.

The journal entries in the books of the seller shall be as follows:

Cash ₱ 896

Senior Citizen/PWD discount expense 224

Sales ₱ 1,120

Percentage Tax due expense ₱ 33.6

Cash/Percentage due payable 33.6

INPUT VAT ATTRIBUTABLE TO SALE SCs and PWDs

The input tax attributable to the vat exempt sale is considered as cost or an expense account by
business establishments and shall not be allowed as input tax credit.

EXEMPTION FROM PERCENTAGE TAX

While the Magna Carta Law for Senior Citizen and PWDs expressly provide for vat exemption on
their purchases of certain goods and services, the law does not include exemption from the payment of
Percentage Tax.