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Jse Module6 Ae25 BT
Jse Module6 Ae25 BT
COLLEGE DEPARTMENT
MODULE 6
Subject:
BUSINESS TAX
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Unit Business Tax
COMMNON VAT RULES ON SALE OF GOODS, PROPERTIES
Module
AND SERVICES -1 and 2
AE25-BT BUSINESS TAX Units: 3hrs Page |2
What are the capital goods? Capital goods are goods with estimated useful life of more than one year
and which are subject to depreciation (or amortization) under the income tax law, used directly or
indirectly, in the production and sales of taxable goods or services.
In other words, over the life of the asset in number of months, or sixty
months, whichever is shorter
Example 1. A VAT taxpayer made a purchase on June 2m 2018 of machinery for use in the business.
(a) If the acquisition cost VAT not included, was P500,000 and its useful life is in ten
years, how much was the input tax for June 2018?
Answer : P500,000 x 12% = P60,000
(b) If the acquisition cost, VAT not included, was P3,000,000 and the useful life is ten
years. How much was the input tax for June 2018?
Answer : P 3,000,000 x 12% = P 360,000
P 360,000 / 60 months = P 6,000
(c) If the acquisition cost, VAT not included, was P3,600,000 and the useful life was
three years. How much was the available input tax for June 2018?
Answer : P3,600,000 x 12% = P 432,000 / 36 months = P 12,000
(d) If the acquisition cost, VAT, not included, was P3,600 and the useful life was three
years, how much was the available input tax for June 2018?
Answer: P 3,600,000 x 12% is P 432,000: P 432,000 / 36 months = P 12,000
When an asset with an unamortized input tax is retired from business, the unamortized
input tax must be closed against the output taxes.
Example 2. On March 1,2017 , A VAT taxpayer made a purchase of a fixed asset with a useful life of 6
years for P2,000,000, not including VAT. On March 1, 2018, the asset was sold for P 1,000,000. Sales in
March 2018 amounted to P3,500,000. VAT not included, while purchases from VAT suppliers amounted
to P 1,800,000. VAT not included. How much was the value-added tax payable for the month?
Construction in progress (CIP). CIP is the cost of construction which is not yet completed. CIP considered
a purchase of services, the value of which will be determined based on the progress billings. Input taxes
on such transaction will be recognized in the month that payment was made on the progress billing. In
case of a contract for the sale of service where only labor will be supplied by the contractor and the
materials will be purchased by the contractee from other suppliers, input tax on the labor will be
recognized in the month that payment was made based on progress billings, where input tax on the
purchase of materials will be recognized at the time that the materials were purchased.
Example 3. If there was a CIP for a depreciable asset for use in business with the following data. The
taxpayer will purchase needed materials as needed, and the Vat contractor will furnish labor for a
contract price of P 2,000,000 on which there would be progress billings. If in a month, the taxpayer
purchased materials ( VAT not included) of P500,000 and paid the contractor P400,000 (VAT no
included) on the progress billing, how much will be the input taxes?
Answer:
On materials ( P500,000 x12 %) - P60,000
On Labor ( P 400,000 x 12%) 48,000
Input Taxes P108,000
(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 on the purchase will be allocated between the VAT and non-VAT business.
(b) When a taxpayer with domestic and export sales makes a purchase during a month from a VAT
registered person for his domestic and export sales, the input tax on the purchase will be
allocated between 12% rated sales and 0% rated sales . The input tax allocable to export sales
is refundable or creditable against other internal revenue taxes due from the taxpayer.
(c) When a VAT – registered person sells good or properties or services to the Government or any
of its political subdivision, instrumentalities or agencies, including government-owned or
controlled corporations (GOCCs) ( subject to 5% final VAT) the input taxes on purchases will be
allocated between the sales to the public and the sales allocated to Government, etc. and the
VAT input tax allocated the later will be cost or expense to the seller.
When a taxpayer who is not subject to the VAT becomes subject to the VAT because:
(A) The gross sales of the preceding year exceeded three million pesos ( P 3,000,000) or
(B) The taxpayer being exempt from the VAT system, opted to be registered under the VAT system.
For a previously VAT-exempt person who transitioned into a VAT taxpayer, he will be allowed
transitional input tax on his inventory on the transition date of:
a) Goods,
b) Materials and
c) Supplies,
Equivalent to:
Two percent (2%) of the inventory value
Or the value-added tax actually paid on it,
Whichever is higher.
Example 4.
Reference Book:
A study on Business Taxes and Transfer Taxes
under the Train Law
Virgilio D. Reyes
2018 Edition
PERFORMANCE OBJECTIVE: After completing this performance task, you were being knowledgeable in the
• computation of VAT on goods, properties and services.
• able to identify goods or products that VAT exempt.
TOOLS AND MATERIALS: Modules, internet.
EQUIPMENT : none
2. Sale of food and soft drinks to the senior citizen were , on prices VAT included:
For food P 150
For soft drinks 30
A senior citizen had a 20% discount.
What and how much were shown in the sales invoice?
4. Mr. L is a taxpayer with VAT and non-VAT business. He had the following data, VAT not included, in
a VAT taxable period.
Sales, VAT business P 3,000.000
Sales, non VAT business 2,000,000
Purchases of goods, from VAT suppliers, for VAT
Business and Non-VAT business 1,000,000
How much was the input tax? __________________
How much was the VAT payable? __________________
5. Research on goods/products that are VAT exempt under Section 109 of the National Internal
Revenue Code. ( Question No. 5, answer must be typewritten. )
Instructions :
GRADES
5 - Excellently Performed
4 - Very Satisfactory Performed
3 - Satisfactory Performed
2 - Fairly Performed
1 - Poorly Performed