Value Added Tax

Concepts, Character/elements of VAT-taxable transactions

Definition: VAT is a uniform tax ranging, at present, from 0% to 12%
 levied on every importation of goods, WON in the course of
business; OR
 imposed on each sale, barter, exchange or lease of goods or
properties on each rendition of services in the course of
trade/business as they pass along the production and
distribution chain
the tax being limited only to the value added to such goods,
properties or services by the seller, transfer or lessor

Shorter Definition: is a uniform tax levied on every importation of goods,

WON in the course of trade or business, or imposed on each sale, barter,
exchange or lease of goods or properties or on each rendition of service
being sold or rendered

Purpose: the VAT system of taxation is:

 principally aimed at realizing the system of taxing goods and
services;
 simplifying tax administration; AND
 make the tax system more equitable, to enable the country to
attain economic recovery
“VAT registration fee” on non-VAT enterprises is not a tax. Thus, VAT
registration fee imposed on religious sects which sells and distributes
religious literature is not violative of religious freedom, although a fixed
amount is not imposed for the exercise of a privilege but only for the
purpose of defraying part of the cost of registration. Registration fee is
more of an administrative fee.

VAT vs Withholding Tax

VAT Withholding Tax
It is an indirect tax1 where the The incidence and burden of
incidence of taxation falls on one taxation falls on the same entity,
person but the burden thereof the statutory taxpayer. The
can be shifted or passed to burden of taxation is not shifted
another to the withholding agent who
merely collects, buy withholding,
the tax due from income
payments to entities arising from
certain transactions and remits it
to the government
EFFECT: Due to this difference, the deficiency VAT and excise tax
cannot be deemed as withholding taxes merely because they
constitute indirect taxes

KIND of VAT
1) VAT on Sale of Goods or Properties
2) VAT on Importation of Goods
3) VAT on Sale of Services and Use or Lease of Properties
Characteristics or Nature of VAT:
 An indirect tax;
 Tax on consumption;
 A percentage tax;
 A regressive tax
adadadada

1
In case of importation, it is the importer that is liable to VAT