VALUE-ADDED TAX

⇢ Tax on consumption
⇢ Included in receipts
⇢ Levied on sales, barter, goods, etc. (in Ph)
⇢ Indirect tax
⇢ Burden passed on the buyer (consumer)

REQUISITES (for a product to be taxable)

● Within
○ Within the Philippines
○ Doctrine/Principle of Cross border

*Goods and services are taxed only where they are consumed.

● Actual Sale
○ GENERAL RULE
○ EXCEPTION: Transactions deemed Sale
(Personal Consumption)
■ Transfer, use, consumption not in the
course of business of goods or properties
originally intended for sale.
■ Distribution or transfer to:
⇢ Shareholders or investors as share
in the profit of the VAT-registered
persons; or
⇢ Creditors in payment of debt.
■ Consignment of goods if actual sale is
not made within 60 days following the date such goods were consigned.
⇢ Vatable if the goods are not sold within the lapse of 60 days.
■ Retirement from or cessation of business, with respect to inventories of taxable
goods existing as of such retirement or cessation.

● Not Exempt from tax

○ 12% – VAT tax rate
○ 0% – zero rated tax, vatable transaction (no output but with input,,, multiplayer is
zero)
○ Exempt – no multiplier and liability

● Trade or Business
○ In the course of trade or business
○ ELEMENTS (for it to be vatable transaction)
■ It must be on a REGULAR CONDUCT
(series of transaction)
⇢ EXCEPTION: SEC. 105 [4] Service is
rendered by a non-resident foreign
person.
■ It must be on a pursuit of
COMMERCIAL/ECONOMIC ACTIVITY
⇢ Business oriented activity (to
generate income/profit)
CHARACTERISTICS OF VAT
1. INDIRECT TAX
⇢ Paid by a person not directly liable.
⇢ Input tax – Shifting of burden (to the consumer/purchaser)
⇢ Seller is liable to BIR to pay VAT
⤷ S.L.S.I (seller, lessor, service, importer)

2. It is a TRANSPARENT FORM of sales tax.

3. It is a tax on CONSUMPTION OF GOODS.

4. It is a tax imposed on Value-added tax.

KINDS OF VAT
● INPUT – purchase
○ VAT component of purchases.
○ Can be deducted to your liability.
● OUTPUT – sales
SECTION 111. TRANSITIONAL/PRESUMPTIVE INPUT TAX CREDITS
● TRANSITIONAL INPUT TAX CREDITS
○ A person who becomes liable to value-added tax or any person who elects to be
a VAT-registered person. (not VAT registered but elected)
○ 2% deducted to your output.
● PRESUMPTIVE INPUT TAX CREDITS
○ Relief being given to the manufacturer and buyer of agricultural products.
○ 4% of the gross value is creditable,,, can be used as deduction to output tax.
(4% input tax – gross value of the purchase of the primary agricultural products)
○ Persons or firms engage in the processing of sardines, mackerel and milk, and in
manufacturing refined sugar and cooking oil. (suppliers are small scale
fishermen, etc.)
○ Public works contractors.

THRESHOLD – 3M (below 3M transactions, exempt transactions)

LIABLE TO REGISTER AS A VAT PERSON

1. Person who has gross sales exceeded 3 million pesos in the last 12 months or,
2. Reasonable ground to believe that gross sales for the next 12 months will exceed 3M.

CONSEQUENCES if exceeded but you did not register to VAT – there will be an output tax of
12% but you cannot avail input credit 12% tax on your sale. (BIR will collect 12% on your sales)

VOLUNTARY REGISTRATION – although your sales did not exceed the threshold of 3M, 12%
out of your output tax will be vated.

COMPLIANCE REQUIREMENT (SECTION 113)

● Details reflected in the OR
● Infos needed in the receipt:
○ Statement that the seller is a VAT registered person.
○ Total amount must be reflected in the receipt.
■ If it is an exempt transaction, the term “VAT-exempt sale” shall be
written or printed prominently on the receipt/invoice.
■ If the sale is subject to zero percent VAT, the term “zero-rated sale”
shall be written or printed prominently on the receipt/invoice.

CONSEQUENCES (FAILURE TO COMPLY WITH THE REQUIREMENT)

● If a person is not VAT registered yet he/she issued a receipt showing their TIN no. +
word VAT:
○ The issuer shall, in addition to any liability to other percentage taxes, be liable
to:
■ A 12% output tax without the benefit of any input tax credit. (SECTION
106 or 108)
■ 50% surcharge under SECTION 248 (b) of NIRC.
EXEMPT TRANSACTIONS:
(PQU)

P.
1. Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business.

2. Pabahay ng government.

3. Sale of real property specialized housing. (have ceiling price of 450k)

4. Sale of residential lots

KINDS OF SALE OF REAL PROPERTIES
● Bentahan ng lupa ONLY (not exceeding 1.5M)
● House and lot (not exceeding 2.5M)
● 2 or more adjacent lot (magkatabing lupa)
○ Provided that it will be adjoined in one residential lot. (the sale
will be exempt if the aggregate value of the lot will not exceed
1.5M)

Q.
1. Lease of residential units with a monthly rental not exceeding 15k PER UNIT. (regardless
of the amount of aggregate rentals)
U.
1. Importation of fuel goods and supplies.
● Must be local to foreign port.
● Purpose is to unload and load.

*3M THRESHOLD. Below 3M, exempt transaction regardless of the WANT requisites. (basta
below 3M, exempt transaction)