Sample Problem 6- VAT on sale of goods and properties INPUT TAXES ON PURCHASE OF CAPITAL GOODS

(a) Goods
Presumptive Input Tax- 4% of Gross Value (b) Estimated useful life of more than (1) year
(c) Subject to depreciation or amortization
Mr. Lee, purchased sardines from a local fishermen and processed this to a canned sardines. The following purchases (d) Used directly or indirectly in the production of and sale of services
were involved:
(a) If the AGGREGATE COST of the capital goods purchased or imported in a calendar month DOES NOT EXCEED
Fish (from fishermen) P100,000 ONE MILLION PESOS (PHP1,000,000), the input tax of each asset will be ALLOWED IN THE MONTH OF PURCHASE
Tin Cans P20,000
Tomato Paste (in cans) P5,000 (b) If the AGGREGATE COST of the capital goods purchased or imported in a calendar month EXCEEDS ONE
Olive oil (in plastic bottles) P2,500 MILLION PESOS (PHP 1,000,000), the input tax of each asset will be THE LIFE OF THE ASSET IN MONTHS OR
Pepper (from farmers) P1,800 SIXTY (60) MONTHS WHICHEVER IS SHORTER
Paper labels (from printers) P500

Determine the VAT Payable. Sample Problem 11- Input taxes on capital goods

If the acquisition cost, VAT not included, was PHP 500,000 and its useful life is ten (10) years, how much was the input
tax for June 2018? 500,000x12%

If the acquisition cost, VAT not included, was PHP3,000,000 and its useful life is ten (10) years, how much was the input
tax for June 2018? 3,000,000x12% divided by 60 months

If the acquisition cost, VAT not included, was PHP3,000,000 and its useful life is three (3) years, how much was the input
Transitional Input Tax tax for June 2018? 3,000,000x12% divided by 36 months
When a taxpayer who is not subject to the value-added tax becomes subject to the value-added tax because:
(a) The gross sales of the preceding year exceeded three million pesos (TRAIN Law) or 1.9MM (pre-TRAIN Sample Problem 12- Input Tax on Capital Goods
law) or
(b) The taxpayer being exempt from the VAT system, he opted to be registered under the value added tax Asset 1: June 5, 2018- (asset life 6 years) PHP 300,000
system Asset 2: June 15, 2018- (asset life of 2 years) 600,000
Asset 3: June 24, 2018- (asset life of 4 years) 480,000
He will be allowed an input tax on his inventory on the transition date. Asset 4: July 1, 2018- (asset life of 2 years) 100,000

- Equivalent of 2% of the inventory value or the vat actually paid WHICHEVER IS HIGHER 1. Total input taxes for assets 1, 2, 3 & 4.
- ONLY APPLIES to GOODS, MATERIALS AND SUPPLIES 2. Input taxes to be credited against output on Years 1, 2, 3, 4,5
- Services, capital goods and goods exempted under Section 109 of the NIRC DO NOT have transitional input tax 3. Input taxes to be credited against output on June & July 2018
4. Prepare journal entries for transactions happened on June 5, 15, 24 and July 1, 2018.
Sample Problem 8- Transitional Input Tax
Mr. A began his business as a trader, but as a non-VAT taxpayer. In his first calendar year of operations (Year 2017)
sales amounted to PHP 4,000,000. He became subject to the value-added tax on January 1, 2018. On December 31,
2017, he had an inventory with valuation in the Statement of Financial Position from purchases from VAT suppliers, VAT
included, of P5,600. In January 2018, his gross sales amounted to PHP 120,000, and purchases of PHP 400,000 from
VAT suppliers, value added tax not included. The value-added tax payable for January 2018 is?

Senior Citizen and PWDs

The following are vatable sales and goods which the senior citizens and PWDs are exempted:
1. Exempted on medicines;
2. Essential medical supplies, accessories and equipment;
3. Fees of attending physicians, medical, dental fees and diagnostic laboratory fees;
4. Fares for transportation;
5. Hotel services, restaurants and similar establishments;
6. Admission fees in cinemas, theaters and other places of culture, leisure and amusement;
7. Funeral and burial services
Sample Problem 13- Retirement of Capital Goods
On March 1, 2017, a VAT taxpayer made a purchase of a fixed asset with a useful life of six (6) years for PHP 2,000,000,
Sample Problem 1- Senior Citizen and PWDs not including VAT. On March 1, 2018, the asset was sold for 1,000,000. Sales in March 2018 amounted to PHP
3,500,000, VAT not included while purchases from VAT suppliers amounted to PHP 1,800,000, VAT not included. How
A senior citizen purchased from Mercury Drug Store a certain drug for his high blood pressure. The drug store sells this much will be the value-added tax payable for the month? Answer: PHP 12,000
drug to the general public at PHP 1,120, vat included. What must the sales invoice show on the sale to the senior
citizen?

Sample Problem 1- Senior Citizen and PWDs CONSTRUCTION IN PROGRESS

A family, consisting of two senior citizens and three other members, ate in a restaurant, VAT not included, the food of
senior citizen 1 was for PHP 300, and for senior citizen 2 was for PHP 200. The billing for food of other three members
was for PHP 500. What must the sales invoice show?
(a) The cost of construction which is not yet completed
(b) Considered a purchase of service, which the value will be determined based on progress billings
(c) Input tax on such transaction will be recognized in the month the payment was made on progress billings
(d) In case the contract only includes labor and the materials will be purchased by the contractee from other suppliers,
(e) INPUT tax on labor will be recognized on the month payment was made on progress billing,
(f) INPUT tax on the purchase of materials will be recognized at the time materials were purchased
Sample Problem 14- Construction in Progress
Mr. Lee entered into a contract with a building contractor. The contractor will furnish materials and labor and Mr. Lee will
pay according to the progress billings of the contractor. The total contract price is PHP 10,000,000. For the month of
June 2018, Mr. A paid the contractor on a progress billing of PHP 2,000,000. How much is the value-added tax?
Sales to the public sales to the Government
(a) When a VAT- registered person sells goods, properties or services to the Government or its political subdivisions,
instrumentalities or agencies, including government owned or controlled corporations (GOCCs) -subject to 5% final VAT
(b) The input taxes on purchases will be allocated between the sales to the public and the sales allocated to the
government
(c) The VAT input tax allocated to the sales in government will be cost or expense to the seller

Sample Problem 15- Construction in Progress

Mr. Lee entered into a contract with an office building contractor. Mr. Lee will purchase materials as needed and the VAT
contractor will furnish labor for a contract price of 2,000,000 on which there will be progress billings. In a month, Mr. Lee
purchased materials of PHP 500,000 (ex VAT) and paid PHP 400,000 on the progress billings. How much will be the
input taxes?

Sample Problem 18- Sales to the Public with Sales to the Government

VAT BUSINESS WITH A NON-VAT BUSINESS In a month, Mr. Lee, a VAT taxpayer had
(a) When a taxpayer with a VAT business and a non-VAT business makes a purchase during a month from a VAT
registered person, for use in both his VAT and non VAT business, the input tax will be allocated between the VAT and Sales to the public: PHP 3,000,000
non-VAT business. Sales to the Government: PHP 2,000,000
(b) Allocate the input tax based on SALES Total PHP 5,000,000
Purchases PHP 2,400,000
Sample Problem 16- Input Tax of a VAT business and a Non- VAT business
Value-added tax payable is? Answer: PHP 187,200
Mr. Lee has Business A which is subject to value added tax, and Business B which is not. Date for the month of March
2018 follow:

3/1 Purchase of goods from VAT suppliers

for VAT business, VAT not included PHP 200,000
3/2 Purchase of goods from non-VAT suppliers,
for non- VAT business, VAT not included PHP 180,000 Monthly and Quarterly VAT declaration
3/15 Purchase of suppler from VAT suppliers,
for use of VAT and non-VAT business, VAT not included PHP 20,000
3/16 Sales, VAT business, VAT not included PHP 700,000
3/25 Sales, non-VAT business invoice price PHP 300,000

Value-added tax payable is? Answer: PHP 58,320

Monthly Declaration (2550M)

(a) 20 days after the end of the month
(b) The excess of input taxes over the output taxes of the 1st month will be carried over to the 2nd month
(c) No carry over from 2nd month to 3rd month (end of quarter)

12% Rated Sales with 0 rated Sales Quarterly Declaration (2550Q)

(a) When a taxpayer with a domestic and export sales makes a purchase during a month from a VAT-registered person (a) 25 days after each quarter
for his domestic and export sales, the input tax on the purchase will be allocated between the 12% rated sales and the (b) Reflects the cumulative transactions of the quarter
0% rated sales.
(b) The input tax allocable to the export sales is refundable or creditable against other internal revenue taxes due from Sample Problem 2- Monthly and Quarterly VAT Declaration
taxpayer
(c) Allocate the input tax based on SALES Output taxes Input Tax
January 31 40,000 20,000
February 28 30,000 30,000
Sample Problem 17- Input Tax of a 12% rated sales with 0% rated sales March 31 20,000 15,000

Mr. Lee , a VAT taxpayer, had the following data on sales, and purchases from VAT suppliers, VAT not included, in a Value-added tax payable at the end of the quarter?
month:

Sales, domestic PHP 2,000,000

Sales, exports PHP 8,000,000
Purchases of goods for domestic sales PHP 600,000
Purchases of goods for export sales PHP 2,400,000
Purchases of equipment, for use of both Sample Problem 2- Monthly and Quarterly VAT Declaration
domestic and export sales PHP 900,000
Output taxes Input Tax
Value-added tax payable is? Answer: PHP 146,400 January 31 40,000 20,000
February 28 30,000 30,000
March 31 10,000 15,000

Value-added tax payable at the end of the quarter?

Sample Problem 3- Monthly and Quarterly VAT Declaration
Mr. Lee, a VAT registered person is a trader. He purchases his merchandise from VAT suppliers. In the months of July, Monthly Declaration and Payment
August and September 2018, he had the following data exclusive of vat: • Every 20th of the month
• Using 2551M
July August September
Sales 400,000 300,000 500,000 Other Percentage Taxes
Purchases 210,000 130,000 260,000
Franchise Tax
Value-added tax payable at the end of the months and quarter? A franchise is a law. It authorizes a certain person, natural or juridical (partnership or corporation), to operate a public
utility. Example:
Water,
Electricity, Railway
system

Other VAT Admin Rules

How to claim a Refund or avail of tax warrants?
1. A refund or conversion of tax credit certificates (warrant) must be availed by the VAT registered person
within 2 years from purchase and shall be granted within 120 days (decision period) from the date of Amusement Tax
submission of complete documents. • Tax base is on “gross
2. Refunds shall be made upon warrants drawn by the BIR Commissioner or authorized representative receipts”
without the necessity of being countersigned by the COA Chairman • Gross receipts
3. In case it was denied, the remedy is to appeal within 30 days to Court Tax Appeals refer to all the receipts
4. In case of inaction of BIR Commissioner or its employees within 90 days (decision period) a penalty shall of the
be imposed upon such misfeasance. proprietor, lessee or
operator of the
Where to File the VAT Returns and Pay the tax amusement place. It
1. In any of the following location within the revenue district where the taxpayer is registered or required to includes income
register: from television, radio and motion picture right
 Authorized Agent bank
 Revenue Collection Officer
 Duly Authorized Government agency

What to if VAT registration has been cancelled

1. Shall file a return and pay the tax due thereon within 25 days from the date of cancellation of registration
2. Only one consolidated return shall be filed for the principal place of business or head office and all
branches

When may the BIR Commissioner suspend or close a business establishment?

1. In case of VAT registered person failure
a) Issue VAT invoice • Boxing
b) Failure to file VAT return exhibitions
c) Under declaration of taxable sales up to 30% where
d) Failure of any person to register under the VAT system when required by the Code World or
Oriental

Percentage Tax
Championships in any division is at stake will be EXEMPTED from amusement tax if one of the contenders is a citizen of
the Philippines AND said exhibitions are promoted by a corporation or association at least sixty (60%) of the capital is
Three (3%) percentage tax applies:
owned by Filipino citizens
1. On person exempt from the value-added tax because their gross annual sales do not exceed the threshold
of PHP 1,919,500
Tax on Winnings
2. Those who are not required to pay a percentage tax under the following:
• A person who wins in horse races and jai-alai, based on his winnings or “dividends” (the tax to be based on the actual
o Tax on domestic carriers
amount paid to him for every winning ticket, after deducting the cost of the ticket
o Tax on international carriers
• Owner of the winning race horses, based on the prize
o Franchise Tax • The tax will be withheld from the “dividends” or “prize” by the operator, manager or person in charge of the horse races
o Amusement Tax or jai-alai
o Tax on winnings
o Tax on stock transactions
o Overseas communication tax
o Tax on banks and non-bank financial intermediaries performing quasi- banking functions
o Tax on other non-bank financial intermediaries
o Tax on Life insurance companies
o Tax on agents of foreign insurance companies

Optional VAT Registration

Test whether a VAT system would be beneficial rather than percentage tax Tax on Stock Transactions

Sample Problem 1- Optional VAT Registration

Sales PHP 200,000
Purchases from VAT registered persons 100,000
Expenses, paid to VAT registered persons 60,000
Declaration and Payment

Excise Tax

 Tax on Manufacturers
 Tax on Importers

Kinds of Excise Tax

1. Specific Tax- an excise tax imposed based on weight or volume capacity or any other physical unit of
measurements
2. Ad valorem tax- an excise tax imposed based on selling price, gross receipts or other specified value of

the article.
The following are subject to excise tax
1. Distilled spirits (liquor)
2. Wines
3. Fermented liquors
(e.g. beer)
4. Tobacco products (e.g.
chewing tobacco)
5. Cigars
6. Cigarettes
7. Automobiles
8. Yachts and other
vessels intended for
pleasure
9. Manufactured oils and
other fuel
10. Mineral products (e.g.
gold, silver)
11. Non-essential goods
(e.g. perfumes)
12. Domestic procedures, surgeries and body enhancements undertaken for aesthetic reasons ( entirely focused on
altering and enhancing a patient’s appearance, improving aesthetic appeal, symmetry and proportion, but NOT
reconstructive surgery or repair, reconstruction and repair, restoration of facial and bodily functions due to congenital
disorders, trauma, burns, infections, disease and those intended to correct dysfunctional areas of the body (a service
subject to excise tax).