CHAPTER 6 - INTRODUCTION TO THE VALUE ADDED TAX

True or False 1
T 1. A person who exceeded the VAT-threshold in any 12-month period must register as a VAT
taxpayer.
T 2. The VAT applies on receipts or sales other than those exempted and those specifically
subject to percentage tax.
T 3. A person with vatable sales or receipts not exceeding the VAT-threshold may register as a
non-VAT taxpayers.
T 4. A person with vatable sales or receipts not exceeding the VAT-threshold may register as a
VAT-taxpayer.
T 5. A person who commences business with an expectation to exceed the VAT- threshold
must register as a VAT taxpayer.
F 6. A registrable person is exempt from VAT.
T 7. AVAT-registered person is exempt from VAT on VAT-exempt sales.
T 8. A non-VAT taxpayer shall not bill VAT on his sale.
F 9. A VAT-registered person is liable to VAT on exempt sales and services specifically subject
to percentage tax.
F 10. The threshold for franchise grantees of electricity is P10,000,000.
T 11. The VAT threshold for sellers of goods or services is P3,000,000.
T 12. The VAT threshold for franchise grantees of gas and water is P10,000,000.
T 13. The VAT threshold applicable to professional practitioners is P3,000,000.
T 14. Exempt sales shall not be billed with an output VAT.
F 15. A sale to the government shall not be billed with output VAT since it is exempt from VAT.

True or False 2
F 1. Export sales shall be billed with output VAT.
F 2. The export sale of a VAT-taxpayer is an exempt sale.
F 3. A non-VAT-registered person who invoiced VAT on his sale shall be subject to 12% VAT
without the benefit of an input VAT 3% percentage tax, and 25% surcharge.
T 4. Exempt sales which are billed as regular sales shall be considered as regular vatable sales.
F 5. The VAT payable of a VAT-registrable person is the output VAT without benefit of Input
VAT plus 3% percentage tax.
T 6. No input VAT traceable to exempt can be claimed sales as tax credit.
F 7. No input VAT traceable to government sales is claimable as tax credit.
F 8. A VAT-registered person shall be subject to a final withholding VAT of 12% on sales to the
government.
F 9. The VAT payable of any person is always 3% of the value-added on the sales of goods.
T 10. The claimable input VAT on government sales is 7% of the sales.
T 11. The VAT payable on zero-rated sales is always zero.
F 12. There is no way VAT payable could be negative in a particular month or quarter.
F 13. VAT is paid in three monthly installments similar to the percentage tax.
T 14. Exempt sales must be indicated as such; otherwise, they will be regarded as regular sales.
F 15. The standard input VAT is 5% of government sales.
Multiple Choice - Theory: Part 1 b. A disco.
1. All of these are vatable, except c. A bowling alley
a. Engineering contractors d. An operator of a race track
b. Lawyers
c. Employee 9. Which is vatable?
d. Brokers a. Local water districts
b. Gasoline stations
2. Which is not VAT-exempt? c. Internet service providers
a Importation of agricultural or marine food d. Schools
products
b. Gross receipts of professional 10. Which is vatable?
practitioners a. Sale of buses and jeepney
c. Receipts from taxicabs b. Sale of vessels
d. Gross receipts of hospitals c. Sale of aircraft
d. Lease of vessels or aircraft
3. Which is vatable?
a. Sale of fertilizers 11. Which will not pay VAT on its receipts?
b. Sales of fruit a. Hospitals
c. Sale of bamboo handicrafts b. Real property dealers
d. Sale of vegetables c. Bookstores
d. Taxicab operators
4. All of these businesses are vatable, except
a. Non-life insurance business 12. Which is vatable?
b. Banks a. Sales of agricultural or marine food
c. Security dealers products
d. Merchandisers b. Gross receipts of medical practitioners
c. Sales of books
5. Which is vatable? d. Sales of fertilizers, seeds and seedlings
a. Fruit dealer
b. Department store 13. Which statement is correct?
c. Cooperative a. Husband and wife are considered
d. Meat vendor separate taxpayers for business tax
purposes.
6. Which of the following will pay VAT? b. For purposes of the VAT threshold, both
a. Farmer exempt sales and receipts from services
b. Food processor subject to percentage tax
c. Rice or corn miller must be included. on
d. Fruit dealer c. A VAT-registered taxpayer must pay VAT
on services subject to percentage tax.
7. Which will not pay VAT? d. All of these
a. International carrier
b. Domestic air carrier 14. What is the general lock-in period for
c. Domestic sea carrier those who voluntarily register as VAT
d. All of these taxpayers?
a. 3 years
8. Which of the following is vatable? IDEAS b. 5 years
a. An operator of cockpits c. 1 year
d. Perpetual 20. Statement 1: Discounts that are
contingent to a future event are deductible
15. To franchise grantees of radio or from gross selling price.
television, VAT-registration shall be Statement 2: Expenses of the service
a. revocable in 3 years. provider that are reimbursed by the
b. irrevocable in 3 years. client forms part of the gross receipt.
c. revocable in 1 year. Which is incorrect?
d. irrevocable perpetually. a. Both statements
b. Neither statement
16. Which is not vatable as a separate entity? c. Statement 1
a. A branch d. Statement 2
b. A subsidiary company
c. A spouse Multiple Choice - Theory: Part 2
d. A parent company 1. Which is non-vatable?
a. Exempt sales billed as regular sales by
17. Statement 1: Sellers of services are VAT persons
subject to VAT on gross receipts. b. Export sales of VAT-registered persons
Statement 2: Sellers of goods are subject to c. Regular sales of registrable persons
VAT on gross selling price. d. Export sales of non-VAT-registered
Which is correct? persons
a. Both statements
b. Neither statement 2. Statement 1: Input VAT is creditable only
c. Statement 1 by VAT-registered taxpayers.
d. Statement 2 Statement 2: Input VAT is deductible by
non-VAT taxpayers against their
18. Statement 1: As a rule, percentage tax is gross income for purposes of income tax.ME
paid monthly. Which statement is correct?
Statement 2: VAT is paid monthly and a. Statement 1
quarterly. b. Statement 2
Which is false? c. Both statements
a. Both statements d. Neither statement
b. Neither statement
c. Statement 1 3. Statement 1: A VAT taxpayer who
d. Statement 2 purchases goods from non-VAT suppliers
will effectively pay a VAT equivalent to the
19. Statement 1: "Gross receipt" means output VAT.
collections and advances by clients. Statement 2: No output VAT shall be billed
Statement 2: "Gross selling price” means on export sales and exempt sales.
gross sales including delivery Which is incorrect?
charges and excise tax on the sales if any. a. Statement 1
Which is correct? b. Statement 2
a. Both statements c. Both statements
b. Neither statement d. Neither statement
c. Statement 1 4. What is the tax payable by a non-VAT
d. Statement 2 taxpayer who issues a VAT invoice or VAT
official receipt?
a. Output VAT plus 3% percentage tax
b. Output VAT less input VAT, plus 3% b. Zero-rated sales
percentage tax and 50% surcharge c. Sales to the government
c. Output VAT plus 3% percentage tax and d. Exempt sales
50% surcharge
d. 3% percentage tax 11. A VAT taxpayer cannot claim input VAT
credit on
5. What is the business tax payable by a a. Regular sales
person who is VAT-registrable? b. Zero-rated sales
a. The output VAT c. Government sales
b. The input VAT d. Exempt sales
c. Output VAT less Input VAT
d. Output VAT plus 3% percentage tax 12. Which is a possible source of input VAT?
a. Importation
6. The claimable input VAT is 12% of b. Purchase from VAT-sellers
purchases from c. Purchase from non-VAT sellers
a. VAT-registered taxpayers. d. A and B
b. non-VAT-registered taxpayers.
c. A or B 13. A VAT taxpayer can claim the actual
d. None of these input VAT credit on
a. Regular sales
7. Which is a source of input VAT? b. Zero-rated sales
a. Purchase of agricultural or marine food c. Government sales
products from VAT-sellers d. A and B
b. Purchase of agricultural or marine food
products from non-VAT sellers 14. A VAT taxpayer may claim only partial or
c. Purchase of vatable goods or services full input VAT credit on
from non-VAT suppliers a. Regular sales
d. Purchase of vatable goods or services b. Zero-rated sales
from VAT suppliers c. Government sales
d. A and B
8. Which is not a sales category for VAT
taxpayers? 15. The output VAT on government sales is
a. Exempt sales a. 12% of sales
b. Zero-rated sales b. 0% of sales
c. Sales to the government c. None
d. Sales to non-profit institutions d. 12% of value added

9. What is the VAT due and payable 16. The output VAT on export sales is
a. Output VAT less Input VAT a. 12% of sales
b. Output VAT less Input VAT plus 3% b. 0% of sales
percentage tax c. None
c. Output VAT + 3% percentage tax d. 12% of value added
d. Output Vat + 3% percentage tax plus
surcharge 17. The output VAT on exempt sales is
a. 12% of sales
10. Which is subject to withholding VAT? b. 0% of sales
a. Regular sales of real properties c. None
d. 12% of value added
23. Statement 1: The VAT returns for the
18. No input VAT is creditable on first two months of the quarter are
a. Government sales prepared on a monthly basis.
b. Regular sales Statement 2: The VAT return on the third
c. Export sales month of the quarter reflects a monthly
d. Exempt sales balance.
Which is incorrect?
19. The claimable input VAT on government a. Statement 1
sales in b. Statement 2
a. 12% of purchases from VAT suppliers c. Both statements
b. 12% of purchases from non-VAT suppliers d. Neither statement
or VAT suppliers
c. 7% of purchases from VAT suppliers 24. Statement 1: VAT paid in the first two
d. 7% of sales months of the quarter is deductible against
the Output VAT for the entire quarter.
20. Statement 1: The VAT due and payable Statement 2: The VAT paid in a quarter is
on regular sales is always positive, deductible against the output VAT of future
Statement 2: The VAT due and payable on quarters of the taxable year.
export sales is always negative, Which is correct?
Which statement is generally correct? a. Statement 1
a. Both statements b. Statement 2
b. Neither statement c. Both statements
c. Statement 1 d. Neither statement
d. Statement 2
25. The monthly VAT return is referred to as
21. Statement 1: Sellers always pay VAT on a. BIR Form 2551M
government sales. b. BIR Form 2550M
Statement 2: Sellers will not pay VAT on c. BIR Form 2551Q
export sales. d. BIR Form 2550Q
Which is incorrect?
a. Statement 1
b. Statement 2
c. Both statements
d. Neither statement

22. Which is a correct statement regarding

the VAT?
a. The taxable quarter of any taxpayer must
be aligned to the calendar year.
b. The taxable quarter of an individual
taxpayer must be aligned to the calendar
year.
c. The taxable quarter of a corporate
taxpayer must be aligned to the calendar
year.
d. All of these