VALUE-ADDED TAX ON SALE OF GOODS OR

PROPERTIES

Chapter 2
 Introduction.
1. The value-added tax is a consumption tax. It is
Chapter 2 imposed on a seller, but the seller passes it on to the

VALUE- buyer,
2. The value-added tax must be shown on the official
ADDED TAX invoice or receipt issued to the buyer, as a separate item:

ON SALE OF 3. The value-added tax is 12%, 5% or 0% of the selling

4. While each sale has a value-added tax, and separate
GOODS OR recording in the price, books of accounts is on a per

PROPERTIES transaction basis, reporting and payment of the value-

added tax to the government is made monthly, on the
transactions of the month.
 Chapter 2
VALUE-ADDED TAX ON SALE OF
GOODS OR PROPERTIES
◦ TAXPAYER
Any person who sells, barters or
exchanges goods or properties in the course of
trade or business will be subject to the value-
added tax. (The law exempts certain
transactions from the value-added tax.)
The taxable transactions are sale, barter
and exchange. Whenever in a rule the word
"sale" is used, it must be understood to include
barter and ex change.
Chapter 2
VALUE-ADDED TAX ON
SALE OF GOODS OR
PROPERTIES
◦ What is a sale, barter or exchange?

A sale is the transfer of ownership of property in

consideration of money received or to be received. For the
expanded meaning of "sale". A barter or exchange is the transfer
of ownership of property in consideration of property received or
to be received. An isolated transaction of sale or exchange of
private property is not in the course of trade or business and is not
subject to the value-added tax.
Transactions deemed sales
• The following are considered "sales" in the course of trade or business subject to the value-added tax (Statutory
enumeration):

Transfer, use or consumption, not in the ordinary course of business, of goods or properties
ordinarily intended for sale or in the course of business:

Distribution or transfer of inventory to shareholders or investors for their shares in the profits of a
VAT-registered person;

Distribution or transfer of inventory to creditors in payment of debt

Consignment of goods if actual sale is not made within sixty days following the date such goods
were consigned;

Retirement from or cessation of business, with respect to inventories of taxable goods as of the
date of such retire ment or cessation.
◦ WHAT ARE GOODS OR PROPERTIES?
Goods or properties are all tangible and intangible objects which are
capable of pecuniary (money) estimation. (The law has a provision that states
what are within the meaning of goods or properties".)
What are goods"? Goods are movable properties. Thus, sales by a car dealer
are sales of goods in the conduct of trade or business, subject to the value
added tax.
What is within the meaning of "properties"?
Included in the term "properties" are real properties. Thus, sales by a real
estate dealer are sales of properties in the conduct of trade or business, subject
to the value added tax.
◦ The tax base - gross selling price.
◦ "Gross selling price"
means the total amount of money or its equivalent which the
purchaser pays or is obligated to pay to the seller in
consideration of the sale, barter, or excluding The value
added tax. The excise tax, if any, on such goods, will form
part of the gross selling price.
◦ Gross selling price
includes everything that the buyer pays the
seller, except the value-added tax shifted to the
buyer. "Gross selling price" does not mean
gross sales. The law and regulations allow
downward adjustments for:
◦ (a) Sales returns and allowances,
◦ (b)Sales discounts agreed upon at the time of
sale, (the granting of which does not depend
on the happening of a future event) indicated
on the sales invoice and availed of by the
buyer.
Illustration 1
Mr. A sold an article to Mr. B.
The quoted selling price was
P10,000, not including freight
and value-added tax. Mr. B has to
pay P10,500 (additional P500 for
the freight) and the value-added
tax be fore title to the goods
passes to him upon delivery at his
place. The GSP is _____
Illustration 2.
Mr. C. produced articles at a product ion cost of P50,000. The
articles are subject to an excise tax of P5,000. The articles became
subject to the excise tax the moment they came into existence, al and
though payment of the tax will be made only upon removal of the
goods from the place of production. The share of the articles in the
operating expenses is calculated at P8,000. The desired profit is
P37,000. The selling Price is ______________
◦ Illustration 3
◦ Mr. D. had gross sales value added
tax not included of 425,000. Sales,
returns and allowances for the same
period, and sales discount, stated on
the invoice, availed of by
customers, were P20,000 and
P5.000, respectively. The gross
selling price and tax base is
_____________________
Illustration 4.
Mr. D sold an article for P50,000,
when the prevailing market value
was P100,000.
Illustration 5.
E Co. is a lumber sawmill. it used lumber
from its production to construct the
residential house of its President.
THE TAX RATES
◦(a) Twelve percent (12%), If domestic sale;
◦(b) Five percent (5%), If sales to the Government (and
certain entities);
◦(c) Zero percent (0%), If export sale.
The law states zero-rated tax on exports (and certain
other transactions).
"Export sales" means the sales and actual shipments or
exportations of goods from the Philippines to a foreign
country, irrespective of any shipping arrangement that may be
agreed upon which may Influence or determine the transfer of
ownership of the goods so exported, and paid for in acceptable
for reign currency or its equivalent in goods or services, and
accounted for in accordance with the rules and regulations of
the Banko Sentral Ng Pilipinas
Illustration 6
Mr. E exported his manufactured goods to F Co.
in the United States, under terms of shipment
F.O.B. California, United States. Payment was in
dollars remitted thru the Philippine National
Bank, California, U.S.A., branch,
Illustration 7
G Co. exported its manufactured goods to H
Co. in the United States, under terms of
shipment F.O.B. Manila, Philippines.
Payment was in dollars remitted thru the
Philippine National Bank, California, U.S.A.,
branch.
The Tax Formula

Output taxes (seller's value-added tax on sales) XX

Less: Input taxes (seller's value-added taxes paid on purchases, etc.)
XX
Equals: Value-added tax payable of seller xx

What is output tax?

It is the value-added tax on a sale.
Case 1
The selling price , value added tax not included, is 20,000.
The sales invoice show details as follows
Selling price 20,000
Value added Tax 12% 2,400
Total 22,400
Case 2
The selling Price, If VAT is not included is 20,000. The
sales invoice shows one item only of 22,400.
Total invoice price 22,400
X factor 12/112
VAT 2,400
Case 3
The selling price if value added tax is not included, is
20,000. The invoice showed one line item only for
23,000
Total invoice price 23,000
X factor 12/112
VAT 2, 464
What is input tax?
It is value-added taxes paid: On local purchases from VAT-registered persons, and on importations of
goods:
(a) For sale;
(b) For conversion into or intended to form part of a finished product for sale, including packaging materials;
(c) For use as supplies:
(d) For use in trade or business, for which depreciation (or amortization) is allowed for income tax purposes
(capital goods except automobiles, aircraft and yachts:
(e) Value-added taxes paid on purchases of real property:
(f) Value-added taxes paid on purchases of services;
(g) Transitional input tax ; and
(h) Presumptive input tax .
◦Illustration 8
Mr. R, a VAT taxpayer, made a sale at
P100,000. value-added tax not included, of
goods that he bought at P3,000 from a non-
VAT taxpayer. The value added tax payable
was?
9. Mr. S, a VAT taxpayer, made a sale at
P100,000, value-added tax not included, of
goods that he bought at P3,000 from a VAT
taxpayer, value-added tax not included. The
value-added tax payable is?
10. Mr. A is a VAT trader. Selling goods purchased from VAT suppliers. He
had the following transactions in June 202A value added tax not included:
June 2 Purchased on Account 42,000
3 Purchased returns and allowance 1,700
5 Sales on account 100,000
6 Purchased discount 300
7 Sales return and allowance 10,000
15 Sales discount 1,800
Date / Transaction Non VAT VAT

April 1 Purchases 10,000 Purchases 10,000

Purchased inventory for 11,200, VAT Cash Input Tax 1,200
1,200 included 10,000 Cash 11,200

April 20 Cash 20,000 Cash 22,400

Sold the goods purchased on a selling Sales 20,000 Sales 20,000
price of 22,400 Output tax 2,400

April 30 Percentage tax 200 Out put tax 2,400

Recognition of business tax Percentage tax Pay 200 Input tax 1,200
Vat Payable 1,200