VALUE ADDED TAX (VAT)

Definition: Output VAT

- Tax imposed on the value added by the seller to the - Sales/barter/exchange

purchase price or cost in the sale or lease of goods, property o Actual (regular) – 12%
or services in the ordinary course of business as well as on o Transactions deemed sale – 12%
importation of goods into the Philippines o Importation – 12%
- A consumption tax/sales tax o Zero-rated – 12%
o Indirect tax
o Economic burden passed to the end consumers Creditable Input VAT
Sales xx
Purchases (xx) - Purchases
Value Added xx o Regular input VAT
-
- A regressive tax o Transitional input VAT
o Increase in tax base, decrease in tax  Former non-VAT payer
- indirect tax o Presumptive input VAT
o impact (liability to o Standard Input VAT
 GR: Seller o Input VAT Carryover
 XPN: Importer in case of importation
o Incidence (burden to pay) Persons Liable to VAT
 End consumer
- An excise tax
1. VAT Registered Persons
o Imposed on the right or privilege to consume
- >P3M gross sales or receipts
- National tax
2. VAT-Registrable Persons
- Flat rate
- Subject to output VAT but cannot avail creditable
o 12%; or
input VAT
o 0% - Mandatory registration
- Ad valorem - P3M threshold of actual gross sales/receipts in the
o Proportionate on the value of the object (value past 12 months
added) - Has reasons to believe that gross sales/receipts
- Cumulative will exceed P3M in the next 12 months
- P10M threshold
Guiding Principles o For radio, television, and broadcasting
corporations
Destination Principle - Those who failed to register
3. Optional/Voluntary Registration
- Place or tax jurisdiction where the goods will be
- Those who did not exceed P3M gross
consumed will determine whether tax will be imposed
sales/receipts
Cross Border Doctrine o P10M for RTB corp.
- Depends on what is more favorable to the
- Outside tax jurisdiction business
- Not subject to business tax - 3 years fixed once registered

Transactions Subject to VAT

VAT Flow

1. Sale of Goods or Properties

Output VAT xx
Creditable Input VAT (xx) 2. Sale of Services/Lease
Net VAT Payable xx 3. Importation
Tax Credits/Payments (xx)
Tax Still Due/Overpayment xx
 Sale of Goods or Properties Importation

- -
TangibleCut
or for bringingobjects
intangible goods capable
to Philippines
or pecuniary
- Tax base
estimation
o Real o properties
GENERAL RULE:
held primarily for sale to
customers orheldValuation
for lease used
in theby BOC course
ordinary
of business  Based on volume or quantity
o TheorightEXCEPTION:
or privilege to use patent, copyright,
design or model,  plan,
Landed secret
Costformula or process,
goodwill, trademark, trade  brand, or othertolike
Cost incurred bring to
property or right Philippines
o The right or privilege Invoice Amount
to use any industrial xx
Custom Duties xx
commercial or specific equipment
Excise Tax xx
o The right or privilege OthertoCharges
use motionxxpicture films,
xx
films, tapes and  discs
Landed Cost xx
o Radio, television, satellite transmission and cable
television time
- REQUISITES: Methods of VAT Presumption
o Within Philippines
1. o VAT Exclusive
Actual/Deemed Sale
o Not- exempt Tax base x 12%
by law, treaties, or international
2. VAT Inclusive
agreement
- Price x (12%/112%)
o Trade/business
- Tax base - If silent
o Gross Selling Price
 Amount per contract/agreement
Selling Price xx
Discounts (xx)
Returns (xx)
Allowance (xx)
GROSS SELLING PRICE xx

Sale of Services or Lease

- Performance of service
- Lease of property
- REQUISITES:
o Sale or exchange of service or lease
o Performed or to be performed in the Philippines
 0% VAT
 No output VAT
 With refundable creditable input VAT
o Not Exempt by law or treaty
o Course of trade/business
o Valuable consideration
- Tax Base
o Gross receipts
 Actual
 Constructive
Contract Price xx
Discounts (xx)
Allowances (xx)
Returns (xx)
Gross Receipts xx
o