Business Taxation consumption outside the territorial border of

Chapter 7 the Philippines

Introduction to Business Tax
Kinds of VAT
Business tax 1. VAT on sale of goods or properties
- Imposed on onerous transfers (sale, bater, 2. VAT on importation of goods
exchange, and importation 3. VAT on sale of services and use or lease of
- W/o business pursued in the Phil (except properties
importation) business tax cannot be applied
- Based on gross sales/receipts Persons Liable
- irrespective of results of business operation • Sale in the ordinary course of business – any
(income or loss), taxpayers engage in trade are person who sells, barters exchange etc, in the
still liable to pay for business taxes ordinary course of business
- In course of ordinary trade of business – regular • Importation – importer, whether or not made in
conduct of business, including transactions the course of his trade or business
incidental thereto
Transfer by tax-exempt entity to none tax-exempt
Isolated transactions – transactions set apart from entity
common business - Non-exempt persons shall be considered the
- GENERALLY not considered in the ordinary importers who shall be liable to pay any ternal
course of business revenue taxes on such importation
- NONRESIDENT PERSONS – considered as being
rendered in the course of trade or business
even if the performance is not regular, subject Characteristics of VAT
to Final withholding VAT 1. Indirect tax where tax shifting is always
presumed
Types of Transfer - Seller is statutory liable to pay for the payment
1. Gratuitous Transfer– w/o consideration for the tax but the amount of the tax may be
(Transfer tax) shifted or passed on the buyer
2. Onerous Transfer – w/ consideration 2. Consumption based
o In ordinary course of trade including - End users of the consumer goods or services
incidental transactions which ultimately shoulders the tax a liability
▪ Subject to: Business tax and 3. Imposed on the value-added in each stage of
income tax production and distribution process
o Not in the course of trade or business 4. Credit-invoice method – tax credit approach,
– not subject to business tax but to sellers acting simply as tax collectors
income tax
Basis of VAT
Types of Business Tax 12% VAT shall be based on
1. Value added Tax Nature of Transaction Tax Base
2. Other Percentage Tax a. Sale of goods or Gross selling price
properties
3. Excise Tax
b. Sale of services Gross receipts
c. Importation Total landed cost
- Transaction subject to vat, is not subject to OPT d. Dealers in Securities Gross income
and can be subject to Excise tax
- Transaction subject to OPT, is not subject to VAT Sale of Goods:
and can be subject to Excise tax

I. Value Added Tax

- Tax on the value added by every seller to the
purchase price or cost in the sale of lease of
goods property or service in the ordinary
course of business and importation
- Cross border doctrine – No vat shall be imposed
to form part of the cost of goods destined for
1
Sale of Services:
Dealer in Securities and Lending Investors:
Gross Selling Price (GSP)
- Total amount of money which the purchaser
pays in consideration of the sale, excluding VAT
- Excise Tax, if any, SHALL FORM PART of the
gross selling price
Gross Receipts
- Total amount of money represented the
contract price or compensation as payments
for service and advance payments actually or
constructively received during the year
excluding VAT
VAT Registration
- 2 classifications
1. Mandatory Registration
i. Any person or entity who is subject to VAT,
aggregate amt of total gross
sales/receipts exceeded 3,000,000 beg.
Jan 1, 2018 for the past 12 months or
reason to believe that the gs/r for the
next 12 months will exceed 3M.
ii. Radio and/or TV broadcasting companies
exceeds 10M. Mandatory registration
applies within 30 days from the end of
the taxable year.
iii. A person required to register as VAT
taxpayer but failed to register
VAT Threshold for Husband and Wife
- For the purposes of the threshold of 3,000,000,
the husband and the wife shall be considered
separate taxpayers
IN SHORT:
o In general > 3M
o For Radio and Television > 10M
2. Optional Registration
i. Any person who is VAT-exempt or not
required to register for VAT may elect
to be VAT-registered by registering
with the RDO.
o Not be allowed to cancel for the next 3
years
ii. For Radio and television, once exercised,
irrevocable
• May apply for VAT registration not later
than 10 days before the beginning of the
calendar quarter and shall pay the reg
fee unless they have already paid at the
beginning of the year
Cancellation of Registration
1. If he makes a written application and can
demonstrate that his GS/S for the ff. 12 months
will not exceed 3M
2. If he has ceased to carry on his trade, does not
expect to recommence any trade w/in next 12
months
Computation of VAT payable
II. Other Percentage Tax (Percentage Tax)
- Any person not a VAT registered person and is
not exempt from business Tax
III. Excise Tax
- Apply on goods, manufactured, produced in the
Phil for domestic sale or consumption and
goods imported
- SIN products (wines, cigarettes)
- Non-essential products (Automobiles &
minerals)