Chapter 6

• Bebe Leasing Corporation had the following receipts in

2013:
Business property Monthly rent Annual receipts
20 residential units P10,000/unit P2,400,000
3 condominium units P20,000/unit 720,000
Total P3,120,000
The Value Added Tax Model
Output VAT P XXX
Less: Input VAT XXX
Net VAT Payable P XXX
Less: Tax credits or payments XXX
Tax still payable (overpayment) P XXX
• Output VAT is the VAT passed on to customers or clients by
a VAT taxpayer on his sales to customers.
• Types of Output VAT
1. Regular Output VAT – for domestic sales; sellers of goods
or properties (GSP) or sellers of services or lease of
properties (GR)
2. Zero Output VAT – for export and other zero-rated sales
• Input VAT is the VAT paid on the domestic purchases or
VAT paid on the importation of goods or services by the
taxpayer.
• Input VAT also arises from incentives provided by law such
as transitional input VAT and presumptive input VAT.
 Types of Sales Description Taxation
a. Exempt sales Sales of exempt goods or services Exempt from VAT
b. Zero-rated sales Export sales, sales to non-resident persons Subject to 0% Output
and those granted zero-rating treatment VAT
c. Sales to government Sales to government agencies or any of Subject to a 5% final
its instrumentalities, including withholding VAT
government-owned and controlled
corporations (GOCCs)
d. Regular sales Sales to domestic or resident private Subject to 12% Output
entities and individuals VAT
• Exempt sales of VAT taxpayers refer to sales of:
• Exempt goods, services or properties
• Services specifically subject to percentage tax
• Exempt sales will not be subject to Output VAT.
• Consequently, the seller is also not allowed to credit input
VAT.
• The input VAT traceable to exempt sales is part of costs or
expenses of the seller and is deductible against gross
income subject to income tax.
• During the month, a VAT-registered persons sold
unprocessed agricultural food products for P400,000 which
he bought for P150,000. He also purchased P100,000 worth
of supplies, exclusive of P12,000 input VAT, which were all
used in connection with these sales.

• Required: Prepare accounting journal entries on the

abovementioned transactions.
• Zero-rated sales are sales of goods or services to non-residents.
• Zero-rated sales include:
• Export sales of goods or services
• Other sales conferred with zero-rating status by law
• Zero-rated sales shall not result in an output VAT but the input
VAT on zero-rated sales is creditable to the zero output VAT.
• VAT payable is inherently negative on zero-rated sales.
• The input VAT on zero-rated sales can be alternatively claimed
through tax refund or tax credit certificate.
• A VAT-registered person exported goods for P400,000.
These goods were purchased for P200,000, exclusive of
P24,000 input VAT.

• Required: Prepare necessary accounting journal entries.

• The sale to government and government-owned and
controlled corporations (GOCCs) is subject to a 5% final
withholding VAT at source on sales.
• The 5% final withholding VAT is presumed the VAT Payable
of the seller.
• Consequently, the seller need not pay further VAT on the
sale.
• Because of this, the claimable input VAT of the seller is
effectively set by the law at only 7% (12% - 5%) of gross
sale to the government or GOCCs.
• A VAT-registered person sold goods to government
agency for P400,000. These goods were purchased for
P336,000, including P36,000 input VAT.

• Required: Present the necessary accounting journal entries

and compute for the VAT due and payable.
• Regular sales pertain to sales other than:
• Exempt sales
• Sales to government or GOCCs
• Export sales
• A taxpayer made sales of P1,000,000, exclusive of P120,000
output VAT, and purchases of P800,000 exclusive of
P96,000 input VAT.

• Required: Compute for the VAT Due and Payable and

prepare necessary accounting journal entries.
1. Sales of registrable persons – subject to VAT despite their non-
registration as VAT taxpayers but no input VAT credit is
allowed.
2. Sales of non-VAT taxpayers who issues VAT invoice or receipt
– illegally charge VAT on their sales shall be subject to VAT
without the benefit of input VAT plus 50% surcharge and the
usual 3% percentage tax.
3. Exempt sales billed by VAT taxpayers as regular sales – will be
considered as regular sales. Furthermore, exempt sales which
are not so clearly indicated as “Exempt” in the VAT invoice or
VAT receipts shall be considered as regular sales subject to
VAT.
• Under the NIRC, the VAT is due quarterly. However, it is
paid in three installments of two monthly and one
quarterly payments.
• VAT is paid monthly and quarterly.
• A VAT taxpayer using the calendar year had the following
output VAT and input VAT during the month starting
January to April 2018:
January February March April
Output VAT P 80,000 P 90,000 P 85,000 P 75,000
Input VAT 60,000 80,000 65,000 70,000

• Compute for the monthly and quarterly VAT payable.

• A VAT taxpayer had the following sales and purchases,
exclusive of any VAT, in the second quarter of the
calendar year:
Sales April May June Total
Exempt sales P 200,000 P 150,000 P 100,000 P 450,000
Taxable sales 625,000 400,000 800,000 1,825,000
Total sales P 825,000 P 550,000 P 900,000

• Compute for the monthly and quarterly VAT payable.

• Using a single invoice or receipt for mixed sales
• A VAT-registered taxpayer may use a single invoice or
receipt involving VAT and non-VAT transactions, provided
that:
a. The invoice or receipt must clearly indicate the
breakdown of the sales or receipt among taxable,
exempt and zero-rated components; and
b. The calculation of VAT on each portion of the sale shall
be shown on the invoice or receipt
• Using a separate invoice or receipt for mixed sales
• A VAT-registered taxpayer may also use different invoice
or receipt for the taxable, exempt and zero-rated
components of its sales. Provided that:
a. If the sale is exempt from VAT, the term “VAT-EXEMPT
SALE” shall be written or printed prominently on the
invoice or receipt
b. IF the sale is subject to zero percent (0%) VAT, the term
“ZERO-RATED SALE” shall be written prominently on the
invoice or receipt