Professional Documents
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VAT Output Taxes
VAT Output Taxes
a. Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business;
b The right or the privilege to use patent, copyright, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like
property or right;
c. The right or the privilege to use any industrial, commercial or scientific equipment;
d. The right or the privilege to use motion picture films, films, tapes and discs; and
e. Radio, television, satellite transmission and cable television time.
2. Characteristic of VAT
a. It is an indirect tax where tax shifting is always presumed.
The value added tax is an indirect tax and the amount may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or
services. The seller is the one statutorily liable to pay for the payment of the tax but the amount of the tax may be shifted or passed on the buyer or
transferee or lessee of the goods, properties or services. This rule shall likewise apply to existing contracts of sale or lease of goods, properties or
services at the time of the effectivity of RA 9337 (VAT Reform Act). However, in the case of importation the importer is the one liable for the
VAT. (RR 16-2005).
The “burden of the tax” is borne by the final consumers although the producers and suppliers of these goods and services are the ones who have to
file their VAT returns to the BIR. Hence, what is transferred or shifted to the consumers is not the “liability to pay the tax” but the tax burden.
b. It is consumption-based.
VAT is a tax on consumption levied on the sale, barter, exchange or lease of goods or properties and services in the Philippines and on importation
of goods into the Philippines (RR 16-2005). It is the end user of consumer goods or services which ultimately shoulders the tax as a liability
therefrom is passed to the end users by the providers of these goods or services. The VAT, thus, forms a substantial portion of consumer
expenditures.
The VAT system assures fiscal adequacy through the collection of taxes on every level of consumption. Each business in the supply chain takes
part in the process of controlling and collecting the tax.
VAT payable is computed by deducting the input VAT from the output VAT. The providers of goods or services passed on to the users the
liability to pay the tax who in turn may credit their VAT liability from the VAT payments they received from the final consumer. This is because
VAT is a consumption tax levied on sales to be borne by consumers with sellers acting simply as tax collectors.
In the Philippines, the “Credit-Invoice Method” or “Tax Credit Approach” is adopted in computing the VAT payable. This means the VAT is
imposed on the sale first called “Output VAT” and a tax credit is allowed or claimed on the VAT passed-on to his purchase or cost of goods or
services known as “Input Tax”. The excess of output VAT over Input VAT is called “ VAT Payable”
Distribution companies and transmission companies are just “ pass through” entities (RMC 62 – 2012,
RMC 71-2012, RMC 61-2005)
Excise tax is applicable to manufacturers and importers of sin products and non-essential
goods. (If the problem is silent, assume excise tax rate of 20%)
(RR 16-2005): No VAT shall be collected on importation of goods which are specifically
exempted under Sec. 109 (1) of the tax code.
5. Output VAT
a. Meaning of output tax
Output tax means the value-added tax on sale or lease of taxable goods or properties or services by any person registered or required to register
b. Determination of output tax
In a sale of goods or properties, the output tax is computed by multiplying the gross selling price by the regular rate of VAT
a. Export sales
b) Sale of raw materials or packaging materials to a nonresident buyer for delivery to a resident local export oriented enterprise to be used in
manufacturing, processing, packing, or repacking in the Philippines of the said buyer’s goods and paid for in acceptable foreign
currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP); (Note With Condition)
c) Sale of raw materials or packaging materials to export-oriented enterprise whose export sales exceed 70% of the total annual production.
(Note With Condition)
e) Those considered export sales under the Omnibus Investment Code of 1987 (E.O No. 226), and other special laws. (Note With
Condition)
f) The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international air transport operations.
Provided, That the goods, supplies, equipment and fuel shall be used for international shipping or air transport operations.
Provided, That subparagraphs (B), (C), and (E) hereof shall be subject to the twelve percent (12%) value-added tax and no longer be
considered export sales subject to zero percent (0%) VAT rate upon satisfaction of the following conditions:\
(1) The successful establishment and implementation of an enhanced VAT refund system that grants refunds of creditable input tax within ninety
(90) days from the filing of the VAT refund application with the Bureau: Provided, That, to determine the effectivity of item no. 1, all applications
filed from January 1, 2018 shall be processed and mustbe decided within ninety (90) daysfrom thefiling of the VAT refund application; and
(2) All pending VAT refund claims as of December 31, 2017 shall be fully paid in cash by December 31, 2019.
Provided, That the Department of Finance shall establish a VAT refund center in the Bureau of Internal Revenue (BIR) and in the Bureau of Customs
(BOC) that will handle the processing and granting of cash refunds of creditable input tax.
An amount equivalent to five percent (5%) of the total VAT collection of the BIR and the BOC from the immediately preceding year shall be
automatically appropriated annually and shall be treated as a special account in the General Fund or as trust receipts for the purpose of funding claims
for VAT refund: Provided, That any unused fund, at the end of the year shall revert to the General Fund.
Provided, further, That the BIR and the BOC shall be required to submit to the Congressional Oversight Committee on the Comprehensive Tax
Reform Program (COCCTRP) a quarterly report of all pending claims for refund and any unused fund.
(g) Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory
effectively subjects such sales to zero rate.
1) Enterprises Registered Under the Bases Conversion and Development Act of 1992 and The Special Economic Zone Act of 1995
(R.A.7916)
• Registered Activities
Enterprises that are registered with the :
a) Subic Bay Metropolitan Authority (SBMA)
b) Clark Development
• Unregistered Activities
Engage in registered as well as unregistered activities.
Registered Activities
Taxability of BOI or PEZA Registered Enterprises: Note that BOI income tax holiday incentive has a sunset provision which
expires in not more than 10 years. Upon graduation to the income tax holiday incentive, an entity may register as an ordinary
enterprise or remain as a BOI-registered enterprise. But either way, there is no more income tax holiday incentive. There are benefits,
however, of remaining as a BOI-registered enterprise particularly on VAT.
Income derived by such enterprises from registered activities shall be subject to such tax treatment as may be specified in the terms of
registration, i.e.:
5% preferential tax rate
Income tax holiday (ITH)
Regular income tax rate
• Except for real property taxes on land owned by developers, no taxes, local and national, shall be imposed on business establishments
operating within the ecozone.
• In lieu thereof, five percent (5%) of the gross income earned (GIE) by all business enterprises within the ecozone shall be paid and
remitted as follows:
• Three percent (3%) to the National Government (60% x 5%)
• Two percent (2%) to the Local Government (40% x 5%)
a) Processing, manufacturing or repacking of goods for other persons doing business outside the Philippines which goods are subsequently
exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and
regulations of the Bangko Sental ng Pilipinas (BSP). (Note With Condition)
b) Services other than processing, manufacturing or repacking rendered to a person engaged in business conducted outside the Philippines or
to a non-resident person not engaged in business who is outside the Philippines when the services are performed, the consideration for
which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP).
c) Services rendered to persons or entities whose exemption under special laws or international agreement to which the Philippines is a
signatory effectively subjects to supply of such services to zero percent rate.
d) Services rendered to persons engaged in international shipping or air transport operations, including lease of property for use thereof;
Provided, that these services shall be exclusive for international shipping or air transport operations Notes: Provided, however,
that the services referred to herein shall not pertain to those made to common carriers by air and sea relative to their transport of
passengers, goods or cargoes from one place in the Philippines to another place in the Philippines, the same being subject to 12% VAT.
e) Services performed by subcontractors and /or contractors in processing, converting or manufacturing goods for an enterprise whose export
sales exceed 70% of the total annual production. (Note With Condition)
f) Transport of passengers and cargo by domestic air or sea carriers from the Philippines to a foreign country. Gross receipts of international
air and sea carriers doing business in the Philippines are still liable to the 3% percentage tax under Sec. 118 of the Tax Code and not to
VAT.
g) Sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower,
geothermal and steam, ocean energy, and other emerging sources using technologies such as fuel cells and hydrogen fuels, Provided,
however, that zero rating shall apply strictly to the sale of power or fuel generated through renewable sources of energy, and shall not
extend to the sale of services related to the maintenance or operation of plants generating said power.
b. Tax Base
Personal property GSP
Real property
1. Cash Sale GSP vs. FMV vs. ZV w/c is the highest
2. Deferred GSP- Gross Selling Price
Payment Basis FMV- Fair Market Value
ZV- Zonal Value
3. Installment Plan [(Collection/GSP)] x GSP vs. FMV vs. ZV w/c ever is the highest
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 exchange of the goods and properties, excluding VAT.
NOTES: The following shall be allowed as deductions from gross selling price;
a. Sales discount indicated in the invoice at the time of sale, the grant of which is not dependent upon the happening of a future
b. Sales returns and allowances for which a proper credit or refund was made for sales previously recorded as taxable sales.
Fair Market Value- means fair market value as shown in the schedule of values of the Provincial and City Assessors (real property tax declaration).
Zonal Value- means fair market value as determined by the BIR Commissioner.
Deferred Payment Basis- means sales of real property, the initial payments of which in the year of sale exceed 25% of the gross selling price.
Installment Plan- means sale of real property, the initial payment of which in the year of sale do not exceed 25% of the gross selling price.
END
Exercises
Exercie A : Determine whether or not the following are subject to VAT
Transaction VAT-subject?
1. Sale of bread by a bakery SG Yes
2. Sale of residential lot by a real estate dealer SP Yes
3. Sale of residential house and lot by the owner who resides in such property SP No
4. Sale of food and drinks by restaurant and other eating places SS Yes
5. Importation of raw materials for business purpose I Yes
6. Importation of computer for personal use I Yes
7. Sale of office supplies by a non-profit institution SG Yes
8. Warehousing services by a government owned or controlled operation SS Yes
9. Sale of food and drinks in a club operated by a non-profit organization SS Yes
10. Sale of drinks by Coca-Cola Company SG Yes
Exercie B Instruction: Place R if the person or entity is required to register as VAT. Otherise place N.
1 VAT-exempt person under Sec 109 who did not register as VAT taxpayer. N
2 Individual engaged in business where the gross sales or receipt do not exceed P100,000 during the 12 month period. N
3 Non-stock, non profit organization whose gross sales or receipts do not exceed P3,000,000. N
4 Multipurpose Cooperatives. N
5 Radio and TV broadcasting whose annual sales exceeded P10,000,000. R
6 PEZA and other ecozones registered enterprises enjoying preferential rate of 5% in lieu of all taxes. N
7 SBMA and other freeport zone registered enterprise enjoying preferential rate of 5% in lieu of all taxes. N