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Jse Module7 Ae25 BT
Jse Module7 Ae25 BT
COLLEGE DEPARTMENT
MODULE 7
Subject:
BUSINESS TAX
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Unit Business Taxes
Module PERCENTAGE TAXES
AE25-BT BUSINESS TAXES Units: 3hrs Page |2
(j) Stamps
(k) Processing fee
(l) customs duty
(m) excise tax, if any
As a rule, VAT is imposed on every sale, barter, exchange of goods or services and on importations.
However, there are instances where the same does not apply because the transaction is subject to other
percentages taxes under Section 116 to 127 of the tax code, as amended.
If the transaction is subject to other percentage tax, it is no longer subject to VAT. Nonetheless, other
percentage taxes as well as value added tax may be imposed together with excise tax.
Under the National Internal Revenue code, the percentage taxes are:
1. 3% percentage tax on persons exempt from the VAT, when their gross annual sales do not
exceed Php 3 million (previously P1,919,500) and who are not VAT registered.
2. Under tax reforms of 2017-18, a self-employed or professional individual whose gross annual
sales or receipts do not exceed Php3M pays the income tax at 8% on gross sales or receipts
only, and is not subject to 3% percentage tax.
Note: Persons subject to the above tax shall have the option to apply for VAT registration not later than
ten(10) before the beginning of the taxable quarter. It shall not be allowed to cancel his registration for
a period of three(3) years.
Illustration 1. Mr. A, whose gross annual sales never exceeded the statutory threshold had \, in a
taxable month, gross sales of P100,000, sales returns and allowances of P5,000 and sales discounts of
P2,000. The percentage tax is
Illustration 2. Mr. B is a trades. His gross sales in the preceding year amounted to P3,000.000. He did not
exceed the threshold, he is subject to 3% percentage tax
Illustration 3 Mr. C sells agricultural food products in 2017, gross sales to P440,000. For the 1 st month of
2018 his gross sales amounted to P100,000.
What business tax would he pay 2017? NONE. He is not subject to the VAT. He is exempted and he is
not subject to 3% percentage tax under Section 109 of the NIRC.
IF VAT REGISTERED
1. Cooperatives, and
2. Self-employed individuals and professionals of the 8% tax on gross sales and/or receipts and
other non-operating income under Section 24 (a)(2)(b) and 24(a)(2)(c)(2)(a) of the tax code as
amended.
Question 1
What is the applicable business tax and the amount due for the year?
Answer:
Applicable business tax :3% OPT because
a) The taxpayer is not vat registered
b) The transaction is not a vat-exempt transaction
c) The amount of sales is < P3M
d) The transaction is not subject to OPT under Sec 117 to 127
Amount of business tax due : (P1.8M x 3% = 54,000)
Question 2
Assuming ABC opted to register under the VAT system, what is the applicable business tax and the
amount due for the year?
Answer.
Applicable business tax : 12% (optional VAT registration)
Amount of business tax due: P 72,000
Output VAT ( P1.8M x 12%) P216,000
Input VAT (P1,2M x 12%) (144,000)
VAT Payable P 72,000
Illustration 2. Omega Corporation (non-vat registered entity) is engaged in trading consumer products.
It generated total sales of P3,200,000 for 2018 taxable year.
Question: What is the applicable business tax and the amount due for 2018?
Answer
Applicable business tax > 12% VAT ( gross sales >P3,000,000)
Amount of business tax due: P384,000 ( P3.2M x 12%)
Note: Although Alpha Omega is a non-vat registered entity, it is still liable to 12% VAT
because the sales exceeded the VAT threshold of P3M (under TRAIN Law). Prior to the
implementation of RA10963(TRAIN Law) is P1,919,500. However, as a consequence of the
failure to register under the VAT system, it cannot pass to customers the applicable output
vat and is not entitled to input vat credit.
Self-employed as “a sole proprietor or an independent contractor who reports income earned from self-
employment. It includes professionals whose income is derived purely from the practice of profession
and not under an employer –employee relationship.
NOT EXCEEDING THE VAT THRESHOLD MORE THAN THE VAT THRESHOLD
or
NOT EXCEEDING THE VAT THRESHOLD MORE THAN THE VAT THRESHOLD
or
Reference Book:
A study on Business Taxes and Transfer Taxes
under the Train Law
Virgilio D. Reyes
2018 Edition
1. Mr. K made importations of goods for sale in March 2018, with landed cost of Php
500,000. He did not make any sale in March. In April 2018, he made local purchases of
P300,000. Vat not included, and his total sales of April (including goods imported in March
was Php 1,200,000, VAT not included.
The value-added tax payable for March and April would have been computed?
PERFORMANCE OBJECTIVE: The learners enable to compute VAT and percentage tax
TOOLS AND MATERIALS: Modules
EQUIPMENT : none
PRECAUTIONS :
GRADES
5 - Excellently Performed
4 - Very Satisfactory Performed
3 - Satisfactory Performed
2 - Fairly Performed
1 - Poorly Performed