Nature and Concept of Business Taxes

Business Taxes – taxes that are imposed upon onerous transfers such as sale, barter, or
exchange.

Three Major Business Internal Revenue Taxes

1. Value-added tax
2. Percentage Tax
3. Excise Tax

Value-added Tax – tax on consumption levied on the sale, barter, exchange or lease of goods or
properties and services in the Philippines and on importation of goods into the Philippines.
- tax on the value added to the purchase price or cost
- indirect tax that may be shifted to the buyer, lessee, etc
Who should be liable to VAT?
• Every person who, in the course of trade or business, sells, barters, exchanges,
leases goods or property, or renders services is subject to VAT, if the aggregate of
his actual or expected gross sales/ and or gross receipts exceeds P3,000,000.00.
Computation of VAT (Tax credit method)
• VAT Payable is computed by deducting the input VAT from the output
VAT. The providers of goods or services passed on to the users the
liability to pay the tax who in turn may credit their VAT liability from
the VAT payments they received from the final consumer.

• The VAT imposed on the sale first called “Output VAT” and a tax credit
claimed on the VAT passed-on to his purchase or cost of goods or
services is called “Input VAT”.
• Sources of Output Taxes
Transactions deemed sale
• Transfer, use or consumption not in the course of business of goods or
property originally intended for sales or for use in the course of
business.
• Distribution or transfer to: a.) Shareholder or investor as share in the
profits of the VAT-registered persons; b.) Creditors in payment of debt
obligation
• Consignment of goods if actual sale is not made within Sixty (60) days
following the date such goods were consigned
• Retirement from or cessation of business, with respect to inventories
of taxable goods as of such retirement or cessation