Chapter 3~ Introduction to Business Taation CHAPTER 3 INTRODUCTION TO BUSINESS TAXATION Chapter Overview and Objectives: ‘ter this chapter, reader are expected to comprehend 1h concep of being engaged In trade or business andthe exceptions 0 therule on regulary of transactions The conceptof a business taxpayer “The relation regulrementson businesses “The business elasfction aso activites and thelr respective tax base “Theconceptof gross sling price and gros receipt Types of business taxpayers andthe VAT threshold the concept business accounting period The diflerencestn business reporting of VAT and non-VAT taxpayers "The scope of VAT and percentage tat fo. The eonceptof"atale sales a receipts THE CONCEPT OF BUSINESS AND BUSINESS TAX Business tax payable by persons sogageie busing rue CONCEPT OF Bus ‘Nines tual oggementjaa commer atts invoving the Shicgoods or series ta castomers rds. [ESSENTIAL REQUISITES OF BUSINESS: 4) Habitual engagement 2 Commercial activity HABITUAL ENGAGEMENT There must be neguargy in Kansactions to construe the presence of Ipsines slates asta sales ae not regular activity hence, presumed not made inthe ordinary course of business. Habitual engagement is normaly manifested by repstration 23 desler a fervice provider of a pracitoner in a particular trade or profession ifowever fare io register does not exnetate one from og Hable wo pay ines taxes = a ‘Chapter 3~ Introduction to Business Taaton Application of the Regularity Rule jpeg are not considered business for lack of regularity in their operations 4. Sale by non-deoers 2 Privilege stores Sale by nondealers Ne ater ae those who makes casual sal of goods or properties Dealers ‘Nee Sa properties which they are not engaged in dealing with are also riderel ale by nonedealers Stes of non-dealers ate not subject to tsiness ex Iustration 1 ee terton medical practioner, soldi prncpl residence fr PAOM ‘the sle of re propertis by @no-eaty eaer sa ens sale not made nthe our of ines Rene emp ftom sie a lustration 2 aaa areal property dealer, During pid of exes cash uly, be aan er nes share of stocks a ather corporations as investnent He seis them when ash needs aise The acquit and sale of stacks investment realtor sone not made in the nua ofthe rely buses onde ae subject bushes ta Mert a scary dealer, the tronsction would be considered made nthe nua of snes ond hee sabe snes ak astraion 3 rane Propector regulary engage so trading merchandise, During the ‘onthe reported the folowing Sales of merchandise _aaa000 Stef personal car 2.200000 ‘The sale of merchandise is subet co uses eax. The sole ofthe car which a poe doom bine) eset x sale onside te merchandsng Business The raul na be subjected to business wesc Jshuo i nt engaged in snes fra car dae. Privilege stores Prien stars most conimonly known as “dangge’ are stalls oF outlets Prep sre mon iy fete wound Carag spol ever Sih a Featalsand Nests (R16 2013) 37(Chaper 3—Itroducton to Business Taxation | privilege store operator shall not be considered habitually engage in busin As sch, het exempe fom business tax but is subject to income be condoned petlage stce_the sacs shal engage ina business. acciagy fora cumulative psi af not more than JS day Otherwise, they Sal be consdere repr taxpayers subjet to business taxes an Income tax (bi) stration 1 Mang Andro makes key chloe and wood arts for sle to tours during the ‘anual Panagbenga Festival He rent aboot Hom the Cy f Baguio, the Sang organize, and recorded sslesof 150,000 oer the one-week eves, Mang Andros not considered haba engaged in business Hi P0000 sles ‘snotsujett basins ar bt sublet neame ae stration 2 Danes akeshop an etablshed business enterprise, sso rented bot rr the organizer, Cy of Bagi, to sels cakes and patie in the Panagbengs Festal Danes generated 00,00 sales during the event. ones Bokeshop bing am etabshed end regulary operating business shal not cand ree oe Te MODI slo teen Sl beet “ne "Exceptions to the Regularity Rule 1. Business principal for subsistence or livelihood 2. Soles ofnonresidens are presumed made nthe course of business usinessprindpally for subsistence or livelihood ‘Businss principal for subsistence or lvelihoo”, refers to businesses with ros sales orrceipts no exceeding PL00,00 per year, Morgina income eager - neers to individuals not deriving compensation Income under an employer-employee relationship but who sslF-omplayed dering ees sso Tce hon in any TEmenth eso 5 Example of marginal income canes a ager rowers or russ (rr or berm) fh smalsatsat stores 8 ‘chapter 3— introduction to Business Taxation 44 daversar operators ofa sngle unitreyl and others sim situated Marginal income earners donot cue lcensed professionals consltans Arist sales agons brokers Including all thers whose income have been subjected to withholding tx (RMC 7.2075) -Aitough regu a operons, arya come eaves ate emp rom business tan but ae subject en income tw (RB? 2012) Sales of non-residents are considered made“in the cours of business” Under current tax regulations, the sles of non-resident persons are presumed made in the course of business without regard 2s to whether fhe ste is regular or tsolated, According, sales by non-residents are lvayg subjctto-*buines ay" (Le. VAT paral). ‘Tis rue is merely intended to support the taxon of importation with consumption tn IIs actually & misnomer which confuses the VAT on Jmporaton to a busines en eli, he sale sno the obec of tnation ‘nutthe purchase of he resident buyer Since import purchase is. form of domestic consumption it must be subject tw consumption te If we view consumption tax a busines tax alone the feller har tobe presumed engaged in business to be subjected to business ‘his rule would have been unnecesary Ifthe line between VAT on Importation and business taxi wel hight in the rgulations. VAT i Usual ewe single typeof consumption tx which includes VAT on importation and VAT on sales whlch i a hasnesr txt mast be eared ‘gain that these areifferent types fax COMMERCIAL ACTIVITY ‘Commercial activity means engagement inthe sale of goods or service for = fruit The goods or services must be offered t the publi witha motive to ‘hrm unresteted amount of pecuniary pans. However, the actal existence ‘oa profit during the period fe a nota precondition to busines tation, vet the business operation results to alos, busines tax still apis, 59Chapter 3 Intodction te Business Taxation ‘The following are not business under this ae 1 erage an nein natin roe Non prot ergenztians_or_asaclaions ~ provides eleemosynary Sevier nt ame at generating nme 4. Enplagment = employees renders services to their employers 18 fxthange toa periodic compensation 4. Dine. Ie corporation = although not considered af an CTSREENC docs nor TVS offering services to the publ or 2 prose astration Mes asonl Regulations Catmisson (PRC) coleted P12,000,000 from estou lena es daring th mont Ke abo corned dona 000.000 The PI2M receipt on income by PR, « government agency, rendering es tal government sere. This note commer att and ixexemp ram. ‘eens ou Coq on tag baadiscommercial ati very depart om the nture of government serie hence subjgrta Busies a. astration2 Tine shards Aad With Wile (UKAW) Ss a nonprofit sac welfare (teen forthe estan of tered sbands,UHAW received 2,000,000, (eStevons fom the pub and generated P400,000 from thesale of wt shop initskind-asing dive. ‘he recip of FM conrtaion or nation ot subjc to busines tx sce ft ‘ot coer in notre wee, th sella ai. sap i # eonmercl ey wich subir to busines tax. The ale applies Pegordes of the ‘tipostion made of such anos Ys ian, a certified public accountant, practices is profesion in the Faksnya the hit natal Ofer of UHAW During the month, e received a ‘PH0;0 vonpensition plus P1000 fringe Benet. mplymentisnota commercial activa oe not nore sles of series to Elen reuters lence the competion fncome and the finge Reefs re fe sbeebs ax Megan a Sdependent decor of Aga Corporation receiving director's feesper demand allowances chapter 3- Introduction to Business Taxation Abthough 0 director may not be an employe, director's fs, per dems and arnet ort ot derived nan economicor commercial iy or rendering of SSrento ons forafee Hence nt subj basnes tx (RMC77 2008) we sess ee ‘te slomests ofan employeremslayeerelatioeship are discussed in deta in ‘pte 10 at ncome Pavan: Laws, Panes and Application bythe same Stor. nustation 5 Jub costed public accountant renders his services tothe public fo a fee, eset ta business tx? ‘The exercise of rofession by regularly rendering services oes fora fe onsen busines pbc bans 0% mastraton 6 Hse Sars fs an insurance agent. Se is pal insurance commision ty Insoranee companies fr every pay se was bl tse nage nt a conrat femmes: Bt conc for ke prvi of aa son fast eer proving profesional gets “Sie crores tote het Hen apa camera ac” ‘out bne tn tases Other persons considered engaged n business AL Constants TE, Sales agents or brokers {Television or mavetalnts and artists Cookinginstretors SS Martalarcinstrucors [NATURE OF BUSINESS TAXES i ar business is 4 tax on consumption, uilization oF urease of goods, properties or services 2, doce = the tax stipes wothesetesather han fo the buyer 4. madige te to secure an enforce compllance, the lw made business tunes appear os fag he prflege to do busines ‘TYPES OF BUSINESS TAKES Ae Nal Added Tae E, Percentage excise TaxChapter 3~ Introduction to Business Taation \Whatisa taxable person in business taxation? The term “pera” refers to any individual, trust, estate, partnersip, ay Sach pes gaturr ute conse salu Te once of ‘taxable unin sppiles a wel in business taxation, except thata taxable unin busines taxation fcalled a taxable perso Mower, nme tx extn docs not neces mean busine xem. Similarly, business I exemption does nat necstary gan income tax exemption. Hence, a gnarl pofsloal-prtnarshipublch exempt from income tax is sublet to bass tac Likewise local water dts Wich 8 gly Spt rom nse tela abet to bonnes ne [REGISTRATION OF BUSINESS Any person who, inthe course of trade or busines sll, barters, exchanges ‘ods or properties, or engaged inte sale of sarvies subject to business ‘shall 1 Tester wih the apprpsite Rovanua Dict fice (RDO) using the ppp IR orm ‘e_pay annul reisttion_fe of 200.00 asng BIR Frm No, 065 for ‘very separate disactestablshmgnt where sales transactions oir Iustraton: Registration fee ‘Nbusiness stared operations with ahead fice and two branch offices plus 2 The basins sal pay 21 P50 or P1500 total registration fe. The warehouse ie ‘ot a sales ote hence exempt rom registration fee. The busines shal py egizrain oval theron Any person who maintains ead of min fies and branches in diferent places sal rier hich has Jurisdiction over the place ‘where the head fic branch Is oat An application for-regstatign shall be Bla withthe RDO where the principal pace of busines branch, and storage place oF premises osted botore-commenement-of busigessar_production or qualieation as 2 withing agent Inthe case o storage places, application shall be fled ‘Chapter3~ Introduction o Business Taxation ‘thin 30 days fFom the date the aforesald promises have been used for sora In any case, the Commissioner of Internal Revenue may, for administrative tnd meritorious reasons deny or revoke any applicabon fr registration. “The registration fo sale pad before the start af such busines and sear heres oF ore offanuay. Pent al bee {o sny screed bene rhe Revenue Dist whore he head ofce oF branch registred nares wher there are no acrid ans the same sl pa the 00 cleeon agent oF 3 ‘auniialty whe ess oranch state Registration cerineate ‘Acerca of restration shal be sued to the applicant bythe concerned Bit ofce upon compliance with the requements or ropsration, Posting of registration certificate Every registered aypayershll post or exhibit his Reltration Cetieate (ovina copy) and duly validated Registration Fee Return at a conspicuous place in ls prclpal place of sings and at cach branch in sucha way tha Bek he pul ‘TYPES OF BUSINESS TAXPAYERS 1 VAT taxpayers - include businesses which are restored or reitrable lundr the VAT system. They pay 1296 VAT on the vale they ad up on Ss ‘het purchases in makang these 2. Non-VAT taxpayers-nchde taxpayers which ar neither registered nor ™ dr he VAT gsr They pa prenape a WHd egyecpenton teaiveriensye [USINESS CLASSIFICATION AS TO ACTIVITIES For purposes of business taxes, businesses are casifed Into which eto hey a nvalved: a” Solesar exchange of gods or properties‘chapter 3~Invaduetion to Business Taxation Sale of Goods or Propertes Under the IRC, the trm “Goods oF Properties refer co all angie 20d snl ober whe ape of ai enon 1 properties hel prima far let castors held for lease os Scot i ainy rr tor baie 2. The pt or the page to ae an cope desi or made, pla Teretformge prtee pa radar; wae brand ore sar openers 'sThevigorprnloge nse the PBiigaipes any nds commer or scent eae 44 Theviht or penag to use von pletre Ms fms pe abd dis ahd adeno saitearsiston and cable lesion ine Sale or Exchange of Services ‘Also ene the MIRC th term Sale oF Exchange of Services” shall mean the performance ofall Kad of services inthe Flips for others for ae, Femaneration oe cobederation, whether i kind or in eas, Inloing those perlrmed or enderedby the flowing TP Constracion and serie contacts 2 Stack, ele, commer cstoms and immigration brokers 2. Lessors property, whether personal or rel a 4 Rosse choses 5. Lassors orestbtors of iemsographc ns seeped ln, ag * mune eect 7. Fropnetors rato, o keepers of hats, motels, rest houses, pension howses ims-Tsnrethesters ad movie houses Propecia or operators of rexanGierereshment-prlors aes and ‘her ealing pace nclidingcubs and extrers 9, Dealers nseeurites To. Leung insets 41, Transpiok-cantgctors in dete transport of passengers, goods or ‘goes rom one ples nthe Plipines to another place nthe Philplnes 12, Commancazig hy ara sx alae to thei anspor of passengers fools ef exgoes for hire and other domestic common carers by land Feltz to ther anspor of gonds or cargoes 14, Siler at ceciaty by generation, transmission and or alstribution ‘companies 14, Heise pants of electri ites telephone and telegraph ado and fr tcleisign recasting and lhe ranehise runes 15, Hore surance nlading srt en ad bonding companies To: Similar sesces gress of whether Gr not the performance thereof els forthe exercise tue ofthe physi ar mental faces ‘chapter3~ Introduction to Business Taxation 17, Thess oust oof the gto reg 0 way copra sespetimlal nseetfrmulsr process pon pemar ae fant or ere propery oa sn Mogul the seo rhea to use fay instr commercial eile equpmett 19. ae at setae indus or comers rowed ce in 20 Mealy ny seitance ta saclay and sxbiday to and is Ti ce2RE Saal rare the sppatn or naen of ny uch ‘sper or tor ay suckled information 21, The sayy_oberoce ya ones? geon or Ws emo Conerdon withthe sof propery_or Highs BIO, othe coe a ay ne mn oF DON PS pores on 2a Po igapcat teeter asisiance or serves, ened eae ee ath tech managerent or ednnstratin of any seni ‘adel or commercial undetan, vente projet Schemes 24 Theles atmos ins fms pean ds nd Fa Tas ase onthe use of oF The ight fo use radio, tele, satelite Transnion at able tleision ine “TAX BASES OF BUSINESS TAKES Tor sellers of ods or properties —tmableon grt sein pice 2. For sellers of sec lessor of properties arable on ras cross seting price = reer to he lamar fone os egal oe eer pys ris lgatdo py to be slerinconsderaton Ta eer orange og or properties. The easel, on such gpd ports shal form prof he grossa P= re erm “grseseling pig icdes sas made nash stein sels encep anyon he etwas of contingent scouts Allowable deductions rom gross selling price: ane teae determined ant ranted. the time of sole, which are Pia csc i he invoc, the TOUTE fring par of ‘ieipon snes andar duly record nthe boks of accounts ‘obo deductibte discounts us ot be dependent pon the happening of fare ever 2, Saleg returns and allowances fr which proper ert or refund was i during tne mont or quarter othe buyer on txabesles 6‘Chapter 3— Introduction o Business Taxation Iasteaion 2 sins taxpayer had the following summarized transactions daring the quarter Veen te > e0000 ‘scree cule ‘e000 icine te (abo coke) ‘ooeco creed owes 000 “Qets scouts io.00 Para fds ining 72000 VAT ond yee 7000 ‘Te grsstngpre sabe ches Fo ‘coe satoon tne nr imi Toate Fron Use and ations ae Note: ques asian nes conn HHTe Conoraton sold various speiizd equipment to a buyer withthe folowing terme ™ use pce 2000000 “Fright $0.00 Inston fee 20000 hecounts : 108 (X Ceshascouts, 294/30 ne 60 days 36,000 ‘The gras seling pice shall be computed 2s List price 2.000000 as Trade lscounts (10% xP2,000.000) 20000 Nevpeie P yano000 Fret ‘30000 Installation oe 20000 Grossseing rice Eazo000 Not: On te isu ie determinable a fe Ch nut sal ot be Usicedtinets tongs ape apr pgs on cay ite he chapter 3~ Introduction to Business Taxation ‘nesta err rental ory, ot chaps i spp wi te services ahd incing the aru charge fo: rsa : nts forsevigts,_ Tender ests arn Ferra ea ding the le ern theses et nob ier person eclaing Tavasices pefored ort be performed fr anoTier person, xia vat stain ged naling service ad he following wansactins ring ste ‘pont Cash eolecton or sees done » sn000 ca atom forsrveesnntyetstared (arenes) 100000 ftcrensrecerend gy ieee «4,000 “Tras reps: P 49000 castes ‘races by costomers © fonoon Cosreeps sn Constructive receipt Centra apt accrs when the mney consideration oF sequal ol Ag ran This added as part ross rec Dep int x nconsdestion of ees nde or nds a ‘eum rhe er at oc “cela hereof ofthe se _ 3 ere mom sibel by he mayor to as ‘Mowe sum two undated ox rceveda hea ‘imbursment or bane payen.on Ee oan Se to bene st STS TR Mana jockey Cl iChupter 3 ~Introdution o Business Taxation Imran proce on dag at he recip f fnsrance proceeds from the destcion of buisiness asset is not vi Sof business {hutlon The ompulay or noun conversion propery ina money Shc ne eas olsun eure shut ordinary course of business. (BIR Ruling No. DA-094-2007 ra “aie ating 7, brary 3, Deeps Copny recive he allowing ameuns ring? month reimbursement fo out-of pocket oss incurred tn Faenoee ‘orsign so00 crt eps pdb Rep moaon teaeftet in So0000 Recap ofagenyoone tobe rented ster company 100000 The re recep sale ash collection fom lente 0 Reimbursements for out-of-pocket costs incurred to clients bot roca eano00 Oe ee ih tk et cia hoes. sbi re Te ‘ony wb id ad wat » Reena my cet Wienoting toer Anmms wield farm paca grass acs because thst ae Construct possesion and not sje to any reservation te witb apr bring tnerey con Inthe calleton proces CH ve Cott Invexment Pin a 139706, September 272005) eos Corporio ses cormmecl paces to varios bsinestes. Dang mom toed 425000 rena nef Secreta wtnolding ‘Theamount wo bereced i gros recep sall be: Netrocelps ater 54 CW P aazso00 ‘Ad 5% ET (,425,000/955) 3596 75000 Grass ect PLsono00| ‘chapter3~ Introduction o Business Taration Not: The ros ects ay lob determin by sosiag wp the net ess 8 wa se the mount ela Ths P1425 0009981500000, BUSINESS TAK ACCOUNTING PERIOD ‘Ie length of accounting period for business taxes s one-quarter. (Sock Tiaaped 126091 NIRG). Thee referred to as a taxable quarter. The ce gnert arte i composed of theee tots which is sychronied with the totale year (Le calendar of fiscal) ofthe taxpayer for income tax purposes. stration Calendar year taxpayers [ip Domingo srepstesing wth te BIR as sl-employed lw practioner Jn income tavation individuals are niet use oly the calendar accountng, ‘Peto Hence, the tasableqatets of At Doing sal be: Prstqurter January Lto March 31 Second quarter | Apel one 30 {hirdqarter uly ea September 30 1 Furth quarter Deteber Io December 3t tustration 2a year taxpayers aan Is oparung under Income aration using a fiscal ear ending ‘very Angst 3, or purposes of business taxation, the taxable quarters of ABC Corporation {inde yea shale msGstquarter September 110 November 3 Steond quarter: Bocember 10 February 20 29 1 Thindguaeer March LtoMay 3 Fourth quarter fame to August 31 [BUSINESS TAX REPORTING LWTRA-QUARTER BUSINESS TAX REPORTING ‘un es test fh gy sos aa eines tris spent hemontsf the art ‘nusiness tax reporting of VAT taxpayers aT eoguayers ae required to epor thar receipts o alsin yo monly Ar satus (BIR Fort 2580 M) forthe ist wo months ofthe quarter and Tae aural) VAT return (IR Frm 2550 Q) onthe third and ast mont of «‘Chapter 3~ Introduction to Business Taration ‘Business tax reporting of Non-VAT taxpayers (Percentage taxpayers) General, percentage taxpayers fle three monthly perceptage tax returns (Gum Form 2581 Norte tree months ote arte. Consequenty. there ‘5 no need to flea consolidated quarterly return on the thd month In ‘other words their quarterly tas paid in thre monthly payments (Chapter 3~ Introduction 0 Business Taxation BIRFormiouse Form 2SS0M —Form2SS0M orm 25500 tne parted res icant sal behest pa. 4 ‘Thell guretste ttt tee ma 220K + PIO 2600, The Tht conprel or Hah lb edb WAT past made te to otto ty acento Ts wb laced nal der {t epotngin Caper However, thee ane ew pecentage taxpayers wha ae subst to artery r ay and are required to fe the quarry percentage tax Deadline of Business Tax Returns ‘eturn(BR Forn 2551 Q)nstea ofthe monthly percentage tx reture (OI WaT payers on Fepape maa ‘ani tacretarn | Within 20 yom ve] Within 20 days rom za month thoend oe month “Types of Business Tax Returns ‘Garry trae | Win 25 days rom e| Within 20dayseom the ~ Tit maarey —|Reiraeaes era | adores Monit iacrtara—| IR Form 250 W|I arm 2851 a Fae ee ee bm2isia=! ‘Any petson wh reies from business with due notice tothe BIR ofce Not: YA taper nth VA rete an gare VAT er in ene oor the tanpayer (head ofc) is regatered or whose VAT regstation lesa Aperemge eerie Faron oe 200 as been canceled sal la ialqvrterly return ad pay the xc Mustain Assur busies taxpayer had the flowing gross ses nthe fist quarter of 2015: anunry=P220,00, February = PIB0O00 and March 260,000. “Assuming the business so percentge taxpayer Apereontage taxpayer il opr theses elows -Jaaty— ebayer Tomblesmomn’ — zz0000 | E1800 _2eNAa BIRFormtouse Frm 25S1M Font 2551M Form 2551M “Soler resins he preted on che pred ns I the perentage apayr i sb uatery percentage tt wl port there ows . " =~ lamar ebay March ‘Tablesmount a = Besi.oog BR Form touse None: None. Form 25510 Assuming the business a VAT taxpayer |AVAT taxpayer al epore the resp allows lamar Febuary March Sales orrewipts EL az0.0og _1w.00 | 6400 7% thereon within want five (25) das ‘shen the busines cease’ to operate or when te VAT registration has bees ofall anced. Provided, however, tht sbsequent monthly decratos/qurteiy Fetus are sil requed tobe Md if the results ofthe winding up of the Mfats/ousiness ofthe txpayer reveal taxable transactions ‘Readers ate alse tocoefly understand the following scion sits ‘ih ceeal a understanding and mastering the busines tax system. ‘THESCOPEOP VAT AND PERCENTAGE TAX Tetus speciealy delineate nthe flloing sections the line of demarcation between the scope ofthe VAT and the Percentage Tax. Please refer also the Append for the Concept Structure of Consumption Taxes, Categories of Business Sal Facmpt sales 2. Sales of services specifically subject to percentage taxes a Other sales n‘Chapter 3 ~Introduction to Business Taxation xe sas ‘There are certain consurptions or purchases that are exempted by the law trom taxation, Reeal again that Bose purchaser made from sbroad are calle! importation while those purchases mae from domestic eles are ‘ales or reclpt nthe seller's perspective. ence, there are two types of exempt consumptions under the NIRC 1. VATexempt importation exempt consumption fromabaaad 2. VAT exempesales~ exempt consumption Irom domestic sellers VAT exompt importations are already discussed in the previous chapter. LAT exempt sales are sales exermpt from business taxes, Under Seton 109 ofthe NIRC. as amended, they are not only exempt from VAT bt also from percentage tx imposition. Examples of exempt sales 1. Sale of asic necessities such as: Li aeclaal or rine food products alts serves ofhosptale reational services of schools housing or resident properties within rice mts 2 sa rect ie Shey spams ten postmaster , Soles o ease sireabacudsels Solesorprinagor books magazines and newspapers 3. Coyual sales or sales of nan-husinesssllers 8” Saleof persons.nol regularyengaged in trade or business 1 Services rendered under an relationship ‘unplayer-employe elation Services rendered by 2 Regonal Area Headarter_ of ‘mulinational company 4. portale ofnon- VAT registered persons ‘emust be recalled again that busines as form of consumption tax and ‘that consumption taxes applies only on domestic consumption. Export sie 's-a foreign consumption which etempt from business tax, For VAT taxpayers export sles subject. 035 VAT. Exempt sales of goods, properties, services or lease of properties wil be discussed in detail nthe follwing caper 2 ‘chapter 3~ introduction to Business Taxation SALES OF SERVICES SPECIFICALLY SUBJECT TO PERCENTAGE TAX ‘Thore ave also services which are specially designated by the lw t be ‘ibject t percentage tox Hence, these taxable sales of services are ject to percentage tx thst repute rein ofthe ‘eps fAaaast Te pom mem on aro VAT List service providers speifcally subject to percentage tax: A, Domestic common carriers by land and keepers of garage pl caergom te tansprtt gon ei mals Heath pancercteersn roger ree Bers wlephone oy tag on oversees Aspach, Freee enersatonongoating bone Pipes 75 tans and nobanefinandal intermediaries Finance companies Fess companies fee ren neon 4. Srainamsenent pees is. Speers of aan ae racks rea ange (PE) onthe sale, barter oe exchange of share Percentage tacos RETRO At ove ae sub to premtge aes at vrus ate rent rem no 9% orn saves Sates of goods properties, services of leas of properties, other than those SMinpe and specie sujet pereertag tt shal be-vatable Meaning of atabe” rn ort cs not mean that he sae automaticly bet ‘ar means subj ashen reel o sins ‘The sale of vatable goods, properties or Services is slec tn VAT Inthe ‘Tena Uatapaper is subeco th general 3 percentage ws ifthe Saleiea non: VAT taxpayer. In Summary: Scope of VAT and Percentage Tax VAT registered fosinoss | Non-VAT business Trompi cer ofguadrandseniees | Nota Nous Sir fren ec sue | Peep x of | Poreng sof Vaasa of goods TDGVAT. | 3a percentage ts aChopter3~lnvoduction to Busines Taxation ‘THE VAT THRESHOLD Mandatory registration as VAT taxpayer Any person who, In the course of trade or busines, sells, barters or ‘exchanges goods or properties or engage Inthe seer exchange osevies Stallbe lable to rplster i A is gross sales or receipt for the past 12 months. have exceeded os cremated 2. There are = forthenese12 monte wiexceed P1979 500 "must be reciled that the term “person icudes inva, rust, etate, Partnership, corporation, jin venture, cooperative o asocaton ‘The PL.919500 level of sales or receipts in any 12-month prld is refered to as the general "VAT Threshold” This threshold applies to all other ‘savers ou tha nhs gantesat aaron. Franchise grantees of radio or television broadcasting companies are mandatory required to register as VAT taxpayer if they have an anal receipt exceeting P10.000.000, Optional Registration ‘Aperreasvho i on. var er ‘Timing of VAT registration 1. Persons comma 7 hr I simultaneously register as VAT ‘apart hes, 2. Perms exceing the YAT te 7 evoke IaS00 a7 95) 5 rane ants all and eon bec. whose go ‘ual sector pesingtendr pee ected Piouadon Sha reser a VAT type wan 30 Sef he saa ‘hendaryer(4er6 05 4 Peron wha notes bu ating oe eee ‘ay sal restr lea 10 apr tsi ofthe table quarter (tid) ‘chapter 3~ Introduction to Business Taxation Revocabilty of VAT registration 1, The VAT registration, whether voluntary or mandatory, of feanlise fresno cn ete hy ‘nue te VAT taxpayers un 2a of ratio oF television, who valonaciy st tomar al Po be awe cance Tis VAT repetation fog the next 3 years This refered toa the 2a lookin period. | 3. Any petson who regsterod as VA person who registered as VAT taxpayers with an-expacaton 19 exceed the VAT threshold but fled to exced the same within 12 ‘months of operations may, ‘The three yer loin period does at apply inthis case. Businesses whose VAT repstration is canceled will be registered or revered as non-VAT taxpayers They willbe subject to the 3% percentage tcon sales or receipts ‘ego eter tte a ate cle Varad ye Fok which qualified tp-cegstar-ae-VAT taxpayer under the VAT ‘Ai petson wh threshold but didnot register as such i referred to as a "VaT-vepistrble person or simply a“regstrable person", enalty for regstrable persons Fale to reater as VAT taxpayer isnot an excuse. Rgitrable persons seal ah sein the periods Th whlch they are not propery ristred ‘COMPRENENSIVE ILLUSTRATION Iastration te Start of operation Ws: Maranao le string a business on February 1, 2014 withthe flowing pojeted res of operatians within 12 months pected sasiecis| xerptsnes P4000 Recep rom serces subject tpercntage tax 1,200,000, Othersaes and eocelps em. Total sale and eps EBamn.000‘Chapter 3~ Introduction to Business Taxation ‘nly wuuble soles or resp shal be considered for the purpase ofthe VAT tivesold Sie eh 800000 expected vatable sles oF receipt below he 71,919,500 VAT eresol, Mes Maraneo may reir a non-A exper 2 The reups ttom serie special set tr eetge x hal roa perentage tt tes 1 Sin Sinn i py 29 gr prone oe we a nd 4. The Znonh paid the edly peating Te-month pr belre the {sent month endrcnsleion. aoe neces ett year of the eae ie to ‘Masration 2: VAT threshold monitoring and VAT transition Assuming farther that Mrs Marana had the flowing acl atable sles or ‘eset and input VAT on purchases sce her February Lcommenteoet of Vauble —Camalatve Input VAT on Salevia sales/ecipe Purchases February tw August 31,2014 2.500000 P 100000 P 128000, September 2018 “40000 saaq00 " "2an00 ‘tobe 2014 300000 2200000 4300 November 2014 450000 2650000 30,000 Dover 2014 50000 3aso000 28,00 “The cumulative sum of the monly vtale sales or east for the lst 12 ‘onthe montre from ee monthly BIR Frm 251M, snes ta fro February August - Percentage tax Mrs Marana sl yay 3% percentage tx The Inpatakes om purchases of on VAT uxpayas ae part cost orexpensesand ae non-real Annes for September Percentage tar fs th Hat as ref ag 2016 Seow he vat Atal bran spay 3.00 (eon 900596) prea tx ond ‘le HK Form 2551M for September sales and receipts, ° ™ ‘sine a or October - Percentage tox ‘Als ine the P1900 00 cumulative sale sof September 2014 is below the LAF thresoht es: Maranvo stat pay F000 (P300.00 x 9%) percentage tx for vsing HI Torn 285 for October ses and receipts. 76 ‘Chapter 3—Introdution o Business Taxation LAT registration Note that Mrs, Maranao exceeded the VAT thresold witha P22M sles so ‘October 31, She must egiater ae VAT taxpayer before the 10 day of the towing month Business ta for November Value added tax ‘Assuming Hes Marana registered as VAT taxpayer, he shall compute her VAT pajaeas flows Cutput WAT (450K 124) P5400 les input vaT 30000 var payable Easo00 AsaVAT taxpayer she allowed to credit input VAT she pld on her parce Dr: Marana sale BIR Form 25500 (omy VAT retro) atd pay the 28,000 VAT payable thereon, ‘uareriy VAT reporting Shee Ms, Maranan isn individual, her taxable quarter shall be patterned to that ofthe calendar yar She shal ile the quarterly VAT etre (BR Form 25800) Yor December 2014 and pay the following quarry VAT: ‘ouput VAT (450K + PSOOK) 12% 114.000 lar Input VAT (30K + 726K) sa900 ‘VAT pain pros monte(RovemBer) —_ 24.000, AT pajae Psa lustatve 3: Non-registration as VAT taxpayer ‘sume insta hat hrs Marana paid P1300 percentage tax in November tnd registred VAT tanpayer only on December 2014, ‘Mrs. Moraao shall be subject to VAT 8 November despite absence of on Regaratle persons are subject VAT without the benefit of input ‘VAT inthe period they are not propery register Hence, Mrs, Maranap shall be regula to pay the ‘allowing additonal Nateient for November fugue VAT (450K x12 P 54000 ass Input VAT at vardue P Sip00 Use Percentage tpl ° tasm Vat payable Fags ote: sin the Marans gard he mac of he rams inpe VA. tit ced traps n‘Chaprer~lntroduction to Busines Taxation Note to Readers Th detaled practical aplication of the VAT threshold wil be discussed in Chapter 6 ater we stay in detail the Hist of exempt sles and the lists of serves subject to perentage axe, Th ilstatons heroin is merely intended to give you a bt jive you a bid’ eve view of, ‘he scope of VAT and percentage tx and to highlight to ou the necessity of mastering the st of exempt sles and thoee services specifica subject 0 ereentage tx to be discussed Inthe succeeding chapters, Chapter 3-Intrvetion to Business Taaton (CUAPTER 3: SELF-TEST EXERCISES CHAPTER 3 SELF-TEST EXERCISES Discussion Questions "Whats business? [Whatore th two essentalroquisites ofa busines? Discus the exception leon the regulon rls ‘What i enable peso buses tation? Discus the elstratonrqulements fer businesses. ‘What are the two business casein 3st eteties? What the tx Ince on each pea busines cases? 17. Hapa the concep of rosea rice an he concept of gross receipts. 4 Whaeare theo types of busines taxpayers 3. Discs the VAT thresh 1o. What the counting period fr businesses Discuss he roles om business sccounting period. 11, Discus the dilference i tax reporting of VAT taxpayers and now-VAT 42, Dee the scope ofthe VAT ad the Percentage Ta 13 Whatiemeunt "able? ‘rrveor Faleo-Part 1 “sbosinessvelves abil enggerent na commer at. {Commerce ectviy meat provision af goods or services othe pai fora prot 23, Tobe construed asbeing engaged in business. one must be employed {1 Alsen bya businessman ate considered mae othe caurse of business 5. Aselfemployed sengaged in business {6 Avemploje snot engaged In business & 5 ‘nce employed one cot be considered engaged in business esta sles of properies is conelderd not nthe course of busines ‘Thane of ordinary sues bys bosines considered made inthe course busines. 1 The sale of capital assets by 2 business Is also considered made inthe ‘use of business bing inckentl to busines operations. 1, Atvsineee which not rqitere is xamp rom uses aes, IZ The absence of a proft motive may exempt an actly fom being “onldered a usines. 1, Gonemment agentes and rstunentaie pd non proft organizations oF ‘Siocon are peneraly considered as businesses 14 company rector consiered tbe engaged in business. 1S Government apenies and instramentalies and po profit ganizations oF Ssocdntons thay be considered as_ businesses on their unvlated eats: bene subjects business ax,Chapter 3~ Introduction to Business Taxation Teor Fate -Part2 1am emplayed profesional i engage in busines 2. Seemployed professionals rendering services to cleats are engaged tn 8. Aponts and brokers are considered at employees; hence, dey are at ansidered ngaen in busines. 4. Consultants and ave att ar considered engage in busines, 5 Businesses prinelpaly far subsitence ae not considered business Because they are non prott {6 Misinesss princlpaly for sabsistnce have groserecelps not exceeding 7100000 peryear 7. The aver of busines principally for subsistence is « marginal income ‘evompt fom both busines tax and ncome 9. Aprofessona consultant or artist can qualify as marginal income carer ‘slong as his receipe donot exceed PLO, 000 In as’ 12-mont prod 10, A sale made by a non-resident is presumed tobe ade inthe cause of busines denpiteeropsary of tanactions 1. Anotpofiorgantation subject to snes ton os rcp ft ‘xyage natives subject ta sins tan 12, Exemption fom income tx means expos fom busines ta, 13 A'non prone organaton wl be exempt from Busnes tox wes the Income generated from aces subject to usinss ta for ater purposes. 14, hn idiidoa, st, estate, partnership, corporation, joint venture, ‘cooperative or asccation wl pay busines at 1s The had a he we areal as» sige person: Mae ay oe 16 Businesses are required to register tothe revenue distri office (RDO) ‘whic has unseen to tht principal pac of sins 17. thstnsse pay annual elation ef P00 18 for i ets hor wh es peraton sa py he 19. Only sales ott ar required to pay the ann registration fe 20, The certineate of Relation shal be exhibited a anpeaous pace in he prin place of ines, ‘Trae o False Para "hsineses are classified imo seller of goods and slr of series for pone or sins aes. 2 Theor goo or properties” inches real properties held primary for salle rue inthe ordinary coure of busine {4 Thetern ood ot proper nodes the right or prviege to use patent, oy sign ert forma, rademarc another property or right (Chapter 3— Introduction to Business Taxation 44 The sale of radi, television, stale transmission and eb television tine Saas of service ot asl of gods o* properties 5. Realestate brokerage i considered a Sle of goods or property eather than sale ofservces 6. contractor isa self gods or property nota seller of seve. 3. Laainger dato of sematerapni Rime ease af service 4 Deals in secures and lending veror are sellers of goods ater than aller sences. 9, ‘he sale of slcrcky by genrstion, wansnision and disbuton ‘ompatis ie conadere se of goods or properties. 10 Sal of gode are taal on gross recep while sels of series are ‘trablecn gross seling pce 11 Te term pros lig pic exelades aes onthe sal. 12 Greet par of ne ross sling price 12 Salcsretarnandllowanoes aro deductible agaist he gros seling pic. 1 Grossing price nade cash ecoun and salman aes. 48. Only acount determinable at the pont ofsle are deducle against proseseling price 16, The term pros recaps tudes leat or customer advances for permed jas. 17, Goss reclined oly ash received and exudes unclleted income 16, Promissory notes snd ther evidence of indebtedness subentted by cents or eastomers are prt of goss receipts. 19, Constructive eel repr of ras eet. 20, Ganarutive voces ate monies which are placed inthe contol ofthe Sslera services tho restos. Toa of agency monks recived bythe bushes arpa roses 2 Recs st snot adound othe net he payer ot cued igre resipt ‘There rete lypesf buss tates VAT, percentage tx ab xt tx ‘Thee are wosjpsofbusnstmpayer VA and prema apap: Noval VAY and porertage tara mately exesve Ercan tether VAT or perenne ax or busnsses framing rinporting ext arden, “Taeacountng prod obsessed the taal yea {AT ery er Quarry tat ro mony a oe quarry 9, Fecnoge taxpayer yt quae tain ree ently payments 10, The ale ques ofan nda patra otha of he senda ‘Mimable quater fs capron adopting 2 Malye for income tx pergre sale chen th hele 12, Corporations py unter VAT whe nd do ot‘hp 3~ troduction to Business Taxation 18, VAT tapayer uses BIR Form 2551 while non-VAT taxpayers use BIR Form "A ew pentane apayes are equ pay theta quarry wie ost pay te ates monty 5. Brempe tls il not besubjeet to VAT or percentage Services specially subject to percentage at ae subject to VAT i not subjected pereontage ax 1 Sa te thn exempts anders sabes percentage ae suc 10, Vata sles mean ales automaticaly sbjot to VAT, 19, Allserucesspetealsubjcto percentage tax are tard at arate of 3%. 20. Al taxpayers with ttl sales or eit inte ast L2-month aggregating 1919300 from whatever type oss subj to VAT 21. Aperson who wisest reper a a VAT taxpayer despite not meeting the {VAT thresholds called regisrabe person” 22, The aggregate sales or recpts trom all soares (exempt, specially sujet to percentage tx and thers) exceed #2,191950, the person is Suigeet VAT. 28, Franchise antes of ratio or television bnusdestng companies whlch ‘exceed 1,000,000 in annual sales mist registra VAT taxpayer 24, Persons who optionally regster as VAT tagpayer cam cancel their ropistration within tees yar 25 Franchise grantees of tlevson or rae broadcasting companies cannot Cancel thei VAT regitaton 26, Registrable persons sal be subjoc o VAT. Tey shall py VAT with the ‘nef of an inpur VAT plsthe percentage ta 27, The VAT payables computed Output VAT lee 3 percentage tx, Multiple chotce~ Theory Part 1 1. Which ofthe follwing is ot considered as enguged in business? 3. Apurely selrempoyed iil 1h Azefomployed and employe indviual © A purely employed individual 4 Aanae 2 Which ofthe folowing entities beow lent considered 2 abusinoss? 44 Nsaiar stare with PSDO,00 anna alee 1b newsstand with sales exceetng PEDO 00 © Negaretevendr with ales not exceeding P100,000 ‘4 An employed profesional earaing parttime slfemployinent ince Chapter 3— Introduction o Business Taxation 3 Which x considered engage in business even if ot regularly engaged in trade? 4 Anon-resient seller who exports int the Philippines 1b Animporer who mport goods nto the lippnes © Asaller ho makes one-time sale of el propery 44 Any seller which ss yoods or service at 2 price above P100,000 duriag the year 44 Wich ofthe flowing s not subjoct to busines tax even Hf made by a registered business? 2 Sac of goods Bh Seat series Sle of propertis considered as otdinary assets 4. Salearproprties considered ar rapt sts 5. Which isnot engagedin barnes? a. Acororate director 1h Abroler ce Anagent Ascent dater Which ofthese east key to be subjected to business tax? 2 Sale of stocks held inventory By Sue ertones held astaventry Sole f stocked a investment 4 Noneof hese 7. Which othe followings considered tobe engaged in business? A Goverment agencies Sales agent 8 Nonprot oanietion D.conealsnt a. Asn Bande % Cana ‘LNs ofthese 8. Which orthese is abays presumed tobe made inthe cours of basins, hence subject business under the eptions? 2 taportsales ‘Domesisles 1 Importation Gallotthese 9. ‘Theconsumprion taxon importation a var caer’ 1 Pereotage ax ‘aNone 10, The consumpton taxon domestisalss a var Aor 1 Percentage ta None‘hopter3~ Introduction to Business Taration ‘The usnestaxon exempt sles we vat Aare 1 Percentage tax None The business taxon services specially subjectto percentage taxis 1 Pereentage tx None ‘Which s more ketyto qua amar incme earner? a arte Salesagent 1 Gansta {LOperstor ofa singe unit trcyle Statement 1: Both the husband andthe wife ae subj other VAT or percentage tx ‘Stterent 2 Tae hushand may pay VAT whe the wie may pay percentage Which statements alse? ~ a'Bolksttemente — ¢Staement oly 1. Netherstatenent Statement? only Statement 1 An employe taxpayer wl pay anal egistration Fe, Satement 2A seleempyed taxpayer wil py annual estat Which statementis correct? 2 Seement | 1 Stterent 2 ‘4Nether stenent Statement Sllers of goods are subject to percentage Statement: Sellers services ar subject toVAT Which statement eorrst? 1 Statement 2 «Both statements Nether statement "he term gros selling pice exces 1M contrit prio the goods sold Th Disunts wick are contingent upon future evens © Delvery changes (Sales returned allowances The erm ros recip enhides 2. Reimbursements or caster expenses pid by the service provider 5 cimbaremens trouot pt epees acre yt servic provider «6 Advances mae by the cet or series yet be rendered (Chapter 3—Introgution to Business Taxation 4. Cashonlotions fr srcs rendered 19, Which isparofgross ects? 2 "Amounts received which wil be remitedt other persons 1h Recap of noucetrom adebtr to oie the consideration ofthe service ferthedebt ofthe service provider Recip foo hank sone (4 ‘Rectpt fom issuance of stocks oF isuance of certcates of Indebtedness 20, Which is nota construtive recip? 4 Hank deposits made avalible to the service provider without restriction |b Trasser of amounts mtaned by the payor tothe account of the contracorsevce prover «© iia consignaton by the payor ofthe contact price which the service provider wish tedonat tthe payor 4 Galeton of evenvefor post serves rendered Multiple Choice - Theory Part 2 1 Which must be presenttaconstracthe essence ofa business? 4 Regulars of transaction 1b Ofenngotseries or goods wo the publicfora profit § Sie Proenen fpr eps Gothaord 2 Aperson who made a one-time or casual sleafropertes i 1 Beenpe from busines tx. BR Subjectto percentage es Sujet tale added ta. 1 Subject to thor parentage taxon val ad tn 4. Aperson who is VAT registered sal pay 2 Sygpercentage ae and VAT 1B T2MVAT one atles or rcspts SS DKVAT nis vaueadded gy» 2124 VAT ont exporesles 38 percentage ax on Is ras reps i T2y'VAT ont val added 12M VAT ont export sales or recip {L aepercentage taxon export sles‘Chapter ~ troduction to Busnes Taxation 5. Anon.VAT registered slr of gods sal pay a. Sopercnagetaxonits poss recope 1 2sgpercentage taconite valueadded Shepercentagetacon ses © Lvarontgrss nye 6 AVAT-cegstered seller of goods shall be suber to SX 1aoutputVat on lcs sa outputVAT on ros renipts © 386percentage aon sales 4394 percenage taxon gross receipes 2. Wh sented toc (edu) apt VA gas Ou VAT? A "VAT reaitere person AT aCe 8) varregsraieporsons ony © NonvATrepstedprent Alor 8. Whaissubjcttovary 4 Those who optional register as VAT tapaye, |b Those who are mandatory required to rgteras VAT taxpayer Those wh are registra AT st Anyorthese 9 Whoare not equredo register othe VAT syste? Those whoare below the VAT tresold |. Those whose ny sae re exemple Those who nly derive recaps fom services specially subject to perentage tax 1% Any orthese 10, ho pays percentage ax? Those who exted the VAT threshold an opted tbe register as non var 1» Mose who didnot exaed the VAT threshold but are opstered as Va taxpayers {Gay thove serves provers specifically subjet to percentage tx “e+ Tose provers of services special subject te pereteg and those whose sles oF receipt in any L2-month period ae ear ae VAT oestol ‘exceeds the VAT thes, fits recs ms here seraaen 1 exempt am percentage ta “Sl subject the same pertentage a. he tits trom services speticlly subject to percentage ta Chapter 3— Introduction to Business Taxation 4. Subject 103% percentage ox 2 Once the vatable sales or respts exceeds the VAT thresh, fture ‘monty sles rom ratbl sales or recep sal be suet a as percentage te bb Percentage tne ofrarous rate: \ nawvar © over 13, A marginal income err sal pay ‘3h percentage invat. ther Aor Nether Anor 8 Bokoee he expr sales Gat -epistered taxpayers ‘sujet toserp ated AT ‘eeprom busines Subject e129 Va ‘Sbjeeo 395 percentage a, pret 15, Mheexport sales of on-VAT rogitere taxpayers subject zrerat VAT. ‘rampt fom busines tx sleet 1258 VAT, Suet 38 percetage tak Poet 16 ‘Anon: VA person with exempt sles exceeding he VAT hresboks sth ‘SQ Enempttrom business ne on exempt sales Exempt rom VAT onal sles Exempt trom percentage taxon al sles a ase 17, AVAT-elstered person wh exceeded the VAT resol ail pay Sour TE Percentage tax © eth Asnd 4. Bither Aor Baths discretion 18, AVAaT-teistered person who didnt exe the VAT threshold il pay Near 1D Percntage tax © Both and {1 ther Agettathiedscrtion‘Chapter 3~invoduction to Business Taxation 19, Anon AT rgistred person who oxcoed the VAT thretold wll ay svar Percentage ea A oan “PHitherA or Batis discretion 20. Avon At reitered psn nd at tee VA esl eee oi ae a Lana bitter Aor Bathisdscredon 21, What sth oneral VAT tresold? 2 Pisi9n00 rsiss00 © P1500000 4 Ptoo00.000 22, Which isa spel VAT threshold? 2"'Pisi9;00 i Pisi9s00 © P1300.000 ‘4, Prov00.000 2 Nandatry or vokintary ropstration as VAT taxpayer under the general thresholds 2 pevoabeantine ‘A revcale afer the apse othe yar > revocable withina yer perpetually irevocae 24 The VAT regatration upon commencement of operation based pan expectation of exceeding te VAT threshold shale 1 evacble anytime 1 revocable ater the lasso hree ears. Sere nnn AAR so acu see the VAT perpetually revocable. 25, Te mandatory of voluntary registration as VAT taxpayers under the Pec threshold is ‘by revocableattr the lapse three years revocable within aye StL perpetay revocable (Chater 3—Inveducton to Business Taxation ‘Multiple-Choee- Probleme 11 Aperson engaged busines old the flowing properties: Sales of oodsheld forsale P_ 200000 Sale of persona residence 2000000 Sle opersonal car 500.000 ‘Compute the sles inthe course of busines sublet business tax. 2 Po ‘2 2200,000 KP 200900 4 2700,000 2 Mes Bln seltemployed generated the following receipt during the year Proceeds of health insurance P 300.000 Recep rom business advisory services as0a00 Receipts of ental from boarding House ‘ion000 \whatis the total amount subject busines tax? 100.000 "24 50,000, 5 P2s0000 “450.00 3, Mr fli, employed ected the folowing rom his employer Proceeds of property insurance P 209000 Prose of ban oan 300000 (Compensation income Soga00 ‘Whats the amount subjecto busines ta? x Po "30,000, B p200.000 ‘i Psn0;00 4. Ur fun Kin, a secur broker effected the sles ofa several secures esulug fe Jongun inthe fliowing commissions: _—Sales__Gommisian sale ofstocks P i200 P2200 Se ofbonds zoo __ 280 Toul Fooona E4000 ‘Compute th sunt of ecipts or sles of Me. jun Kim subject fo business neo 00900 Se PA. 404000‘Chapter 3~ Introduction to Busnes Taxation P 400,000 ) seats Gas Ok 6. Mr Kim fong.a securty dealer sold he following during the montis Sale of scutes or own account an0a00 Commision income onsale of secures ofcents 36,000, Sale of vacan thls vestment 1.000000 hati the amount subject to busines tx? abe xiaae000 1 P6000 P4360 1. Mr Masipg had annual goss receps not exceeding P100,000 During he ‘onthe ade the llowing sles Sale of caruge P2000 Sale of ears Seon Ssleofeandies 3am. rota am PO P5000, P2000 Pe.000 8. A non-tock chartabl organization realized the following during the ont Membership contribatons — P 300000 Donationtfom variousdonors "44000 Sateafsouvenine 200.000 ‘Compute the amount subject to business ta ato © 500.000, SA P200000 ‘kP900.000 9. 10 Corporation, merehandser, made had the following sles daring the month Sale of merchandise P> 200000 mmission nome frm consignors sn000 Sales of stocks nvestnants soo.00 Q Chapter 3 Inttducton to Business Taxation Computetheamountsubjcto business py Lh 2.200000 300,000, 4 P2sn000 ‘4430000 10. Mang Ingo is has sara store wih 500,000 annual sales. Head the folowing sles during the mont Sale of various merchandise P_sn000 ish donsted by his brother 200.000 (Gch rom proceed of bak oan 400,000 Compute the amount subject busines ta aro €F250,000, 2 P3q000 4 520;000 11, Mr Pro Kalo is «consultant, Daring the month, be as aly ene nt from whichhe derived the following recep: Profesional fees P ssog00 Lise Withholding tax 7500 Netamount recated zoo inate the amount subject obusinoss tax? 2 PD P4250 P7500 150000 12, Mang Panda i farmer He sol his acura land vsti 200,00 for Pr,nb0000 to start» play tring Busnes. Hew much subject Co basics tn? ro «80,000 #200000 4471000000 18, Raymund is eoncurenly employed to Cumanan Corporation and Pastas Company. He rected he oa drng the month -Cumanan_ —_Psauas Professonal fees penso000 PF 40000, Use Crediablewitholdngtax 70006000 aan repayment = 12000 5a DMF 000 2 Net pay Ean E00 Compute the amount subject to busines x "bo e770 62000 ‘iP99.000 0(Chapter 3—Introdvevon to Business Taxation 1M. fective 2014, Malyhalay Corporation, a VAT-txpayer, changed ts accounting peed to 2 fiscal year ending every August 30- What i the ‘ean fr theft quarter VAT rear Under the new accounting period? a. September25, 2014 e Nowember 25,2018, 1S September25, 2014 law Ofc started persion on uly 1, 2044 as a VAT taxpayer The parneshipadopted he calendar year bas, ‘The partersip shal fle ts frst monthly VAT return on a. fly 20,2014 August 202014 & jyaa;zoe baagust 30,2018 2 In the immediately preceding problem, the general professional, ares shall ets fst quarters VAT returnon 2 ety 20,2014. ‘augur 25,2018. Th Augusto, 2014 4 Otaber 25 2013, 4. solr o gods ha ee lowing rasctons during the month cashes P 200,000 Creiyinstalimentsales (40% etleted) "304000 Sales turns ae allowances 40000 Froightaut charged to cusomers 20000 Whatis the amount subjeeto busines tax? 2 Pd ‘-Pa.000, 1h. PHeo.n00 500,000 4A. Aservce provider had theftowing income ding the month es, pat incash nd checks P 100,000 espa notes 150000 Advances by cents foratureserces "20000 Rambursementforoutatpocktespenses 0000 Reimbursement forelient expenses 2.000 Tot E3000 2 Chapter 3 ~ Introduction to Business Taxation Compute the amount subject to busines ta 2 "Pasn000 © P 160,000, 5 p2s0.00 ‘4p 120000 5. Atmpayer athe following sales or receipt in he pat weve months Examples P 1.500.000 Series subject to percentage tax ‘00.000 Othe sles. _—so0.000 Tot Emam Which iscoreece? 2 hetangajer subject to VAT oa sles. 1, ‘Thetaxpayer issubjectto VAT on able sales other thn exempt sales © Tho tapayer i abject to percentage tae om tae sale her thas sxemptsales «4 Thotargayer isujectto percentage taxon al sles 46 Kudaat Company had the following sles and receipts data im the past tee onthe: Bxompr sales P 200,00 Servier sulec to percentage tax 400.000 Other sles 200.000 ‘Ts F2eo0.000 Which score? he npr aaj VAT on ter es i Mhetapaer bce VATon sis oa ten exempt sles : Thetmpayr ibe prongs tv ont ter an feaptai 4. Thotpaper sale percep ona. 7. ‘Thetellowing data eras ta business taxpayer during a quarter: bay feb — March evenue(Sales) 200,000 250,000 P220000, Cash cateione rp "240900 230000, Which ofthese propery refect he monthly reporting of a non-A service provider? March P2mo00 — P2500 F220000 © pi79o00 — P2agn0 —-PetnDDD 4 P2000 239000 Fe7m000 2Chapter Inoducton to Business Taxation Whi these property elec he monthly reporting ofa non. VAT aller of ode? Jon Seba Mar, a P1700 P2an0 —-P2aO00 h p2ono0a —P2snago—P2zo.c00 © 0170000 P24N000—Pe4000 200000 250000 Pe7a,000 Whi ofthese propery refict the motlyeeportng ofa VAT service Joa febrwane Mart a. P1700 P2iN000 —Fzan000 P20n000 — P2sno0o —P220.000, © P1700 P24n000 —Pewta00 & 200000 250000 Pe74000 Wich ofthese propery cefltthe monthly reporting ofa VAT seller of ood Janay faba Marck a Pi7o0 — P2an00 —Pzs000 200000 250000 Pz21000 © 170000 249000 Pewta00 @ P200000 P2500 Pe7H000 FaodTaste a restaurant olerig lca cine, Whi correct? a” FoodTaste ls engagdin the sale of service, 1h PoodTasteisenpagedin the sale of gods, _oodTaste engaged Dr in the sale of gods and sevice |& FoodTart snot engaged inbusneee iss Beauty sells cakes to many jeepney drivers who patronize her ht and ‘eet akee During he month Mss Seay sold? S0D,00D worth a cakes ‘nd collected P260000, Whats the amount tobe reported for busines tax purposes? 9280 000 (Lindeterminable oni i beaut operating beauty par She i indeed to Zeus for P40, Unable to pay her debt Maryn agreed to render src to “sty return Zeus anes Marys indebtedness. Which score? nthe canton fh BOO neds tay tect by, The cancelation of the P0000 indebtedness s exempt rm income os ‘chapter Introduction to Business Taxation The camcllation ofthe P30,000indbiednes i constructive rcpt trl sett business x. <4 The cancelation ofthe PI0,000 indebtedness constructive receipt elas subject to business a 14, Aisa UAT regina seller with annual sales of PIM. Dring the oh be feeorded only P1000 isles and setsined an operating Hoss o P40 000 Which score? oe tapaye is exempt from business ax during the month since here Iss operating Ls tb Thetaxpayer shal pay VAT. © Thetanpayer sala percentage tx The taper sal py WAT tha annual sales exceeds 1,919,500 {uring the year teros, he shall ay percentage as 15 chemrez Company, a non-VAT taxpayer paying. 3% percentage eeded the VAT theesbold on Septanber 2014. Tt also generated 00,000 and P400,000 sls im Octaber and November and paid P 12,000 nd 928000 input VA in hese month reapeeely.Chemrerimmedlatly Feglsterto the VAT system atthe start of November 2014 ‘compute the busines tx payable in October : : apo 82400 P5000 ‘427,000 16, Compute the busnesstax payable a November 3"P12000 ‘e360 P2000 P38.000 9s