TAXATION II

Seatwork

Name: EISLEY SARZADILLA-GARCIA Date: March 19, 2022

1.

Value Added Tax, or VAT, and Percentage Tax are both business taxes collected from the sale of
goods and services. The taxes differ, however, in their applicability. Business owners must understand
which tax they are registered for and the financial implications for their business.

Percentage Tax is a direct tax – the seller is the one who shoulders the tax and files it with the
BIR.

Whereas, VAT is an indirect tax – the end consumer is charged for the tax, while the seller is
responsible for remitting to the BIR.

Under the Tax Code, the rate of VAT is 12%. To compute for VAT, deduct the input VAT from the
output VAT to arrive at the VAT due and payable. Again, to understand what is meant by input VAT and
output VAT, check out our recent article on VAT.

Computing Percentage Tax is much simpler. Multiply the applicable Percentage Tax rate against
the taxable base (i.e. for standard businesses – the total value of the gross sales or receipts) and the
resulting amount is the Percentage Tax due and payable to the BIR.

2.

Provided under Tax Code, Section 130 (C),

Manufacturer's or Producer's Sworn Statement. - Every manufacturer or producer of goods or

products subject to excise taxes shall file with the Commissioner on the date or dates designated by the
latter, and as often as may be required, a sworn statement showing, among other information, the
different goods or products manufactured or produced and their corresponding gross selling price or
market value, together with the cost of manufacture or production plus expenses incurred or to be
incurred until the goods or products are finally sold.

3.

Before implementing CREATE law, the percentage tax rate is three percent (3%) of gross sales or
gross receipts. However, due to create law in 2020, the percentage reduces from 3% to one percentage
(1%) tax rate. CREATE law applied to both corporate and self-employed individual and professional
taxpayers whose gross sales or receipts don’t exceed 3,000,000. However, this reduction doesn’t apply
to cooperatives and self-employed individuals and professionals who opted to file at 8% income tax
rates.

4.

YES. Under the Tax Code, The 8% Income tax rate is not automatic to any self-employed; they must meet
the following criteria:

(1) Individuals whose gross receipts/sales, including non-operating income, should not exceed
3,000,000 VAT thresholds during the taxable year.
(2) A taxpayer earning exclusively from self-employment or practice of a profession,
(3) Must indicate the intention to opt for an 8% income tax rate upon registration or during the initial
quarter return of the taxable year after the start of your business.
(4) Must be registered and subject to percentage tax and exempt from VAT (Value Added Tax)

If such requirements were met, then a professional is subject to such tax as well.

5.

The two kinds of excise tax under Tax Code are:

(1) Specific Tax which refers to the excise tax imposed which is based on weight or volume capacity
or any other physical unit of measurement and;
(2) Ad Valorem Tax which refers to the excise tax which is based on selling price or other specified
value of the goods/articles

Specific Tax is somehow better since it is effective in reducing demand, that is why cigarettes in the
Philippines have been reduced in consumption and demand because of specific tax. While, Ad
Valorem tax places a proportionately higher tax on expensive goods.