Professional Documents
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Final Paper
Final Paper
TAX
Almost all countries apply
WHAT IS VAT? preferential rates to some goods and
services, making them either “zero rated” or
VAT stands for Value Added Tax. “exempt.” For a “zero-rated good,” the
VAT is a type of sales tax which is levied on government doesn’t tax its retail sale but
consumption on the sale of goods, services allows credits for the value-added tax (VAT)
or properties, as well as importation, in the paid on inputs. This reduces the price of a
Philippines. good. Governments commonly lower the tax
burden on low-income households by zero
To simplify, it means that a certain rating essential goods, such as food and
tax rate (0% to 12%) is added up to the utilities or prescription drugs.
selling price of a goods or service sold. It is
also imposed on imported goods from EXEMPTING
abroad.
If, by contrast, a good or business is
WHO ARE REQUIRED TO BE VAT “exempt,” the government doesn’t tax the
REGISTERED? sale of the good, but producers cannot claim
a credit for the VAT they pay on inputs to
Any person or entity who, in the produce it. Because exempting breaks the
course of his trade or business, sells, VAT’s chain of credits on input purchases, it
barters, exchanges, leases goods or can sometimes raise prices and revenues.
properties and renders service Hence, governments generally only use
subjects to VAT, if the aggregate exemptions when value added is hard to
amount of actual gross sales or define, such as with financial and insurance
receipt exceed One Million Nine services.
Hundred Nineteen thousand Five
Hundred Pesos (P1,919,500.00)
A person required to register as VAT
taxpayer but failed to register What are the Types of VAT and Tax
Any person, whether or not made in Rate?
the course of his trade or business,
who imports goods. 1. VATable – 12%
On sale of goods and properties –
What is the difference between zero twelve percent (12%) of the gross
rating and exempting a good in the VAT? selling price or gross value money of
the goods or properties sold, bartered
For a “zero-rated good,” the or exchanged
government doesn’t tax its sale but allows On sale of services and use or lease
credits for the value-added tax paid on of properties – twelve percent of
inputs. If a good or business is “exempt,” the gross receipts derived from the sale
government doesn’t tax the sale of the good, or exchange of services, including
but producers cannot claim a credit for the the use or lease of properties.
VAT they pay on inputs to produce it. On importation of goods – twelve
percent based on the total value used
by the Bureau of Customs in When is the Deadline for Filing and
determining tariff and customs Payment of VAT?
duties, plus customs duties, excise
taxes, if any, from customs custody; For the monthly VAT return,
provided, that where the customs deadline is every 20th of the
duties are determined on the basis of following month of the applicable
quantity or volume of goods, the month.
VAT shall be based on the landed
cost plus excise taxes, if any. Example: For July VAT return, the deadline
is August 20.
2. VAT Zero-Rated – 0%
Zero-rated is a sale, barter or For the quarterly VAT return,
exchange of goods, properties and/or deadline is every 25th of the
services subject to 0% VAT pursuant following month of the applicable
to Sections 106 (A) and 108 (B) of quarter.
the Tax Code.
Zero-rated is usually pertaining to Example: For the second quarter ending
export sale of service or those zero- June 30, the deadline is July 25.
rated as approved by special laws
such as PEZA or Economic Zone What is the Penalty for Non-Filing or
registered companies. Late Filing?
Illustration
Output VAT 230,000
Purchases:
Goods from non-VAT supplier P280,000
Goods from VAT suppliers w/
VAT Invoices 240,000 input tax credit equivalent to 2% of the
Importation of car for personal beginning inventory of goods, materials, or
Use, VAT inclusive supplies or the actual VAT paid thereon
1,120,000 whichever is higher.
Importation of grapes and In short, the transitional input VAT is based
Apples for sale on vatable beginning inventories in the
300,000 month of registration as a VAT taxpayer.
Importation of merchandise Illustration:
for sale, VAT inclusive Initial Inventory:
896,000 Raw land acquired from P10,000,000
Services from VAT suppliers, a non-VAT seller
with ordinary receipts 120,000 Various Equipment 8,000,000
Computation for creditable input VAT: Office Building 20,000,000
Goods from VAT suppliers Land where the office
224,000 Building stands 4,000,000
VAT on importation Transitional Input VAT 200,000
96,000 *10,000,000 x 2%
Total creditable input VAT
120,000 Accounting entry to record transitional
*224,000 x 12/112 24,000 input VAT
* 896,000 x 12/112 96,000 Transitional Input VAT XX
WHO CAN AVAIL INPUT TAX Beginning Inventory XX
CREDIT? To record the transitional input
a. The importer upon payment of VAT VAT.
prior to the release of the goods from Requisites for claim
Customs custody. 1. The taxpayer must submit an
b. The purchaser of the domestic goods inventory list of goods.
or properties upon consummation of 2. The taxpayer must prepare an entry
the sale; or recognizing the transitional input
c. The purchaser of service or the VAT credit in his accounting book.
lessee or licensee upon payment of *The transitional input VAT shall be
the compensation, rental, royalty or claimable in the month of registration as a
fee. VAT taxpayer.
REGULAR INPUT VAT
12% VAT paid on:
TYPES OF CLAIMABLE INPUT VAT a. Domestic purchase of goods,
1. Transitional Input VAT services, or properties, or
2. Regular Input VAT b. Importation
3. Amortization of Deferred Input VAT Timing of Credit of Regular Input VAT
4. Presumptive Input VAT Source of Regular Input Timing of Credit
5. Standard Input VAT VAT
6. Input VAT Carry-over Purchase of goods or In the month of
TRANSITIONAL INPUT VAT properties purchase
A person who becomes liable to value-added Purchase of services In the month paid
tax or any person who elects to be a VAT- Importation of goods In the month VAT is
registered person shall be given an initial paid
Purchase of depreciable
capital goods or
properties
General Treatment In the month of
purchase
Monthly aggregate Amortized over useful
exceeds P1,000,000 life in months/60 mos.
Whichever is shorter
Purchase of non- Not creditable Special rules on input tax credit
depreciable vehicles and 1.NON-DEPRECIABLE ASSETS
on maintenance incurred 2.CONSTRUCTION IN PROGRESS
thereon 3.PURCHASE OF REAL PROPERTY ON
INSTALLMENT
Monthly Aggregate Acquisition Cost 4.PURCHASE OFGOODS OR
This refers to the total price, excluding PROPERTIES DEEMED SOLD
VAT, agreed upon one or more assets RULES IN THE DEDUCTIBILITY OF
acquired and not the payments or DEPRECIATION EXPENSE ON
installments actually made during the VEHICLES
calendar month. A.ONLY ONE VEHICLE FOR LAND
TRANSPORT ISALLOWED FOR THE
USE OF AN OFFICIAL OR EMPLOYEE,
Illustration: Purchase of Goods or THE VALUE OF WHICH SHOULD NOT
Properties EXCEED P2,400,000.
Input VAT on Goods B.NO DEPRECIATION SHALL BE
In March 15,2015, ABC Company ALLOWED TO YACHTS,
purchased goods worth P40,000, exclusive HELICOPTERS, AIRPLANES AND/OR
of VAT. ABC Company paid the invoice on AIRCRAFTS, AND LAND VEHICLES
April 28, 2015. WHICH EXCEED THE P2,400,000
Input VAT 4,800 THRESHOLD, UNLESS THE
*Shall be claimed in March, not April. TAXPAYER’S MAIN LINE OF
*40,000 x 12% BUSINESS IS TRANSPORT
Input VAT on Importation OPERATIONS OR LEASE OF
In March 2015, ABC Company imported TRANSPORT EQUIPMENT AND THE
goods with a total landed cost of P200,000. VEHICLES ARE USED IN SAID
ABC Company paid the 240,000 VAT on OPERATIONS.
importation and withdrew the goods on C.THE PURCHASE MUST BE
April 2015. SUBSTANTIATED WITH SUFFICIENT
*Shall be claimed in March, not April. EVIDENCE SUCH AS OFFICIAL
RECEIPTS OR OTHER ADEQUATE
RECORDS
D.THE DIRECT CONNECTION OR
RELATION OF THE VEHICLES TO THE
DEVELOPMENT, OPERATION AND OR
CONDUCT OF THE TRADE OR
BUSINESS OR PROFESSION OF THE
TAXPAYER MUST BE IN OTHER WORDS, THE OUTPUT VAT
SUBSTANTIATED. APPEARING IN EVERY BILLING
STATEMENT OF THE SELLER AT
NON-CONFORMANCE ETO THESE EVERY INSTALLMENT WHICH THE
REQUISITES SHALL RENDER THE BUYER IS OBLIGED TO PAY IS THE
VEHICLE NON-DEPRECIABLE INUT VAT CLAIMABLE BY THE
FORINCOME TAX PURPOSES. BUYER. THIS MEANS THE BUYER
THE INPUT VAT ON THE PURCHASE ALSO CLAIMS THE INPUT VAT IN
OF A NON-DEPRECIABLE VEHICLES INSTALLMENTS.
AND ALL INPUT VAT ON 4. INPUT VAT ON GOODS OR
MAINTENANCE EXPENSES INCURRED PROPERTIES DEEMED SOLD
THEREON ARE LIKEWISE THE CLAIMABLE INPUT VAT ON
DISALLOWED FOR TAXATION GOODS OR PROPERTIES PREVIOUSLY
PURPOSES.(RR2-2012). DEEMED SOLD SHALL BE THE
2.INPUT VAT ON CONTRUCTION ON PPORTION OF THE OUTPUT VAT
PROGRESS IMPOSED UPON THE GOODS DEEMED
CONTRUCTION IN PROGRESS IS THE SOLD WHICH CORRESPONDS TO THE
COST OF UNCOMPLETED GOODS PURCHASED BY THE BUYER.
CONSTRUCTION WORK OF AN ASSET. ILLLUSTRATION
THIS IS THE ACCUMULATED MR. A HAD 1,000 PIECES OF
PROGRESS BILLING OG THE MERCHANDISE WHICH WERE
CONTRACTOR FOR THE EXTENT OF PREVIOUSLY DEEMED SOLD SHALL
COMPLETION ON AN ASSET UNDER BE THE PORTION OF THE P20,000
CONSTRUCTION. UPON COMPLETION WITH AN OUTPUT VAT OF P2,400
OF THE CONSTRUCTION ACTIVITY. UPON MR A’S RETIREMENT FROM
3.INPUT VAT ON PURCHASE OF BUSINESS.
REAL PROPERTY ON SUBSEQUENTLY, MR.B BOUGHT 500
INSTALLMENTS PIECES OF THE 1,000 PIECES OF THE
IF THE SELLER OF A REAL PROPERTY MERCHANDISE DEEMED SOLD FROM
IS SUBJECT TO VAT ON THE SALE ON MR. A FOR P12,000, INCLUSIVE OF
A DEFFERED PAYMENT BASIS NOT VAT. MR. A INDICATED THE INVOICE
ON THE INSTALLMENT PLAN, THE NUMBER WHEREIN THE OUTPUT TAX
INPUT VAT SHALL BE CLAIMABLE BY ON THE DEEMED SALE WAS IMPOSED
THE BUYER AT THE TIME OF THE AND BILLED MR. B AS FOLLOWS:
EXECUTION OF THE INSTRUMENT GROSS SELLIING PRICE: P11,000
SALE,SUBJECT TO THE VAT PREVIOUSLY PAID
AMORTIZATION RULE ON ON DEEMED SALE 1,200
DEPRECIABLE PROPERTIS. TOTAL 11,800
HOWEVER, IF THE PURCHASE IS BY
INSTALLMENT AND THE SELLER IS
ALLOWED TO BILL THE OUTPUT VAT
IN INSTALLMENT, THE BUYER CAN PRESUMPTIVE INPUT VAT
ALSO CLAIM THEINPUT VAT IN THE PERSONS OR FIRMS ENGAGED IN THE
SAME PERIOD AS THE SELLER PROCESSING OF SARDINES,
RECOGNIZES THE OUTPUT VAT(SEC. MACKEREL AND MILK AND IN THE
3 RR4-2007) MANUFACTURING OF REFINED
SUGAR, COOKING OIL,AND THE SECONDMONTH OF THE
PACKEDNOODLE BASED INSTANT QUARTER.
MEALS, SHALL BE ALLOWED A 3. THE INPUT VAT CARRY-OVER
PRESUMPTIVE INPUT TAX IN THE SECOND MONTH OF A
EQUIVALENT TO 4% OF THE GROSS QUARTER IS NOT DEDUCTIBLE
VALUE OF THEIR PURCHASES OF TO THE THIRD MONTH OF THE
PRIMARY AGRICULTURAL QUARTER.
PRODUCTS WHICH ARE USED IN 4. THE INOUT VAT CARRY-OVER
THEIR PRODUCTIONS. OF THE PRIOR QUARTERIS
THE TERM “PROCESSING” SHALL DEDUCTIBKE IN THE THIRD
MEAN PASTEURIZATION, CANNING, MONTH QUARTERLY BALANCE
AND ACTIVITIES WHICH THROUGH OF THE PRESENT QUARTER.
PHYSICAL OR CHEMICAL PROCESS WHAT ARE EXCLUDED FROM INPUT
ALTER THE EXTERIOR TEXTURE OR VAT CARRY OVER?
FORM OR INNER SUBSTANCE OF A 1.ADVANCE VAT WHICH HAVE BEEN
PRODUCT IN SUCH MANNER AS TO APPLIED FOR A TAX CREDIT
PREPARE IT FOR SPECIAL USE TO CERTIFICATE.
WHICH IT COULD HAVE BEEN PUT IN 2. INPUT VAT ATTRIBUTABLE TO
ITS ORIGINAL FORM OR CONDITION. ZERO-RATED CLAIM WHICH HAVE
WHAT IF THE SELLER IS A NON- BEEN APPLIED FOR A TAX REFUND
VAT REGISTERED SELLER? OR TAX CREDIT CERTIFICATE.
THE GOVERNMENT OR GOCC SHALL 3,. INPUT VAT ATTRIBUTABLE TO
WITHOLD A 3% FINAL PERCENTAGE ZERO-RATED SALES THAT EXPIRED
TAX ON THE SALE BEFORE AFTER THE TWO-YEAR
PAYMENT. PRESCRIPTIVE PERIOD.
INPUT VAT CARRY-OVER
THE INPUT VAT CARRY-OVER IS THE
EXCESS OF THE INPUT VAT OVER
THE OUTPUT VAT IN A PARTICULAR
MONTH OR QUARTER. IT IS A VAT RULES ON CLAIM OF INPUT VAT
OVERPAYMENT THAT APPEARS DEDUCTION(CREDIT)
AFTER TAX CREDITS AND PAYMENTS 1. SPECIFIC IDENTIFICATION-
ARE DEDUCTED AGAINST THE NET INPUT VAT CAN BE TRACED TO
VAT PAYABLE. A PARTICULAR SALES
TRANSACTION IS CREDITED
AGAINST THE OTPUT VAT OF
SUCH SALES.
RULE ON INOUT VAT CARRY-OVER 2. PRO-RATA ALLOCATION-THE
1. THE INPUT VAT CARRY-OVER AMOUNT OF INOUT TAX DUE
OF THE PRIOR QUARTER IS OR PAID THAT CANNOT BE
DEDUCTIBKE IN THE FIRST DIRECTLY AND ENTIRELY
MONTH OF THE CURRENT ATTRIBUTD TO ANY ONE OF
QUARTER. THE SAES TRANSACTIONS
2. THE INPUT VAT CARRY OVER SHALL BE ALLOCATED
IN THE FIRDT MONTH OF THE PROPORTIONATELY ON THE
QUARTER IS DEDUCTIBLE IN BASIS OF SALES.
Chapter 10 – VAT PAYABLE AND Private – Sales P162,000
COMPLIANCE REQUIREMENTS Export Sales 0
How do we determine the VAT Payable? Government – Sales 30,000
Output VAT xx Output VAT 192,000
Less: Creditable Input VAT xx
Net VAT payable xx
Less: Tax Credits / Payments xx *1,350,000x12% = 162,00
Tax Still Payable / (Overpayment) xx *300,000x0%
*250,000x12%
Sugar owners – a person who has legal title Shall also be subjected to advance VAT for
over the sugar and may include sugar the purpose of getting advanced tax
planters, traders, sugar millers, cooperatives collection from the VAT on the sale of the
or associations. flour by millers.
Base price of advanced VAT: P1,400 per Basis of the Advanced VAT
50 kg. bag
For wheat imported by millers – 75% of the
*Cooperatives are exempt from VAT. sum of:
Hence, it is not subject to the requirement of a. Invoice value multiplied by the
advanced VAT. currency exchange rate on the date of
payment.
Illustration b. Estimated custom duties and other
charges prior to the release of the
Cane sugar purchase-farmers P2,000,000 imported wheat from Custom’s
Refining expenses, w/ VAT 324,000 custody, except for advanced VAT,
Total Production – 50 kg-bag and
refined sugar 4,000 c. 5% of the sum of a and b.
bags For wheat purchased by flour millers from
wheat traders – 75% of the sum of:
Advanced VAT a. Invoice value
P672,000 b. Estimated freight
*4,000bagsxP1,400x12% c. And 5% of the sum of a and b.
The BIR RELIEF System *Troy shall pay the VAT on the entire
250,000 sales in May. Troy shall pay the
percentage on the P300,000 sales in June
and each month thereafter.