Professional Documents
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Self-Paced Learning Module: College Depar
Self-Paced Learning Module: College Depar
Self-Paced Learning Module: College Depar
COLLEGE DEPAR
MODULE 2
Subject:
BUSINESS TAX
This material has been developed in support to the Senior High School Program
implementation. Materials included in this module are owned by the respective copyright
holders. AISAT College – Dasmariñas, the publisher and author do not represent nor claim
ownership over them.
This material will be reproduced for educational purposes and can be modified for the
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profit.
Unit Business Taxes
VALUE-ADDED TAX on SALE OF GOODS or
Module
PROPERTIES
Units 3hr Page | 2
AE25-BT BUSINESS TAXES
: s
Preliminary Statements.
1. The VAT is a consumption tax. It is imposed on a seller, but the seller passes it on to the buyer.
2. The VAT must be shown on the official invoice or receipt issued to the buyer, as a separate item;
3. The value-added tax is 12%, 5% or 0% of the selling price.
4. While each sale has a VAT, and separate recording in the books of accounts is on per transaction
basis reporting and payment of the VAT to the government is made on the transactions of the
month.
THE TAXPAYER
Any person who sells, barters or exchanges goods or properties in the course of trace or
business will be subject to the value-added tax. ( The law exempts certain transactions
from the value-added tax).
Illustration 2-2. Mr. B sold his three year old family car.
This is not subject to the VAT
Illustration 2-3. Mr. C sells household furniture. He removed from his store a living room set for use in
his residential house.
This is deemed a sale.
Illustration 2-4 D Co, declared and paid a dividend out of merchandise inventory.
This is deemed a sale.
Illustration 2-5 E Co. is indebted to F Co. for raw materials. When E Co. could not pay in money, F co.
agreed to receive the finished goods of E. Co. in payment.
This is deemed a sale by E Co.
Illustration 2-6 G Co. a manufacturer, made sales, as follows: To Mr. H, on credit, with title to the goods
passing to Mr. H, and to Mr. I, on consignment, with title to the goods to pass only upon
actual sale of the consigned goods to a buyer. The goods consigned to Mr. I are still
shelves of Mr. I. The sale to Mr. H is subject to the VAT because title to the goods has
passed to Mr. H. The consignment to Mr. I, although title to the goods has not yet
passed, will be subject to the VAT when actually sold by Mr. I or after sixty days from the
date of consignment ( Provision of law)
Illustration 2-7 J & K was a partnership in trade J&K was dissolved and L&M was formed to continue the
business of J&K. At the time J&K was dissolved the books of accounts showed a
merchandise inventory of P100,000 to which was also the physical inventory.
The inventory will be deemed to sold by J&K to L&M Co., and will be subject to the VAT.
“Goods or properties” are all tangibles and intangible objects which are capable of pecuniary (money)
estimation, ( The laws has a provision that states what are within the meaning of “goods or
properties”.)
“Goods” are movable properties. Thus, sales by a car dealer are sales of goods in the conduct of trade
or business subject to the VAT.
“Properties” are real properties. Thus sales by a real estate dealer are sales of
properties in the conduct of business subject to the VAT
“Gross Selling Price (GSP)” – the total amount of money or its equivalent which the purchase pays or is
obligated to pay to the seller in consideration of the sale, barter or exchange, excluding the VAT. The
excise tax, if any , on such goods, will form part of the gross selling price.
Stated briefly “GSP” includes everything that the buyer pays the seller, except VAT shifted to the buyer.
Gross Selling Price does not mean Gross Sales. The law and regulations allow to downward adjustment
for:
a) Sales Return and Allowances
b) Sales Discounts
Illustration 2-8. Mr. A sold an article to Mr. B. The quoted selling price was P10,000, not including
freight and VAT. Mr. B has to pay P10,500 (additional P500 for the freight) and the VAT
before title to the goods passes to him upon delivery at his place.
The gross selling price was P10,500.
Illustration 2-9 Mr. C produced articles at a production cost of P50,000. The articles are subject to an
excise tax of P5,000. The articles became subject to the excise tax the moment they
came into existence, although payment of the tax will be made only upon arrival of the
goods from the place of production. The share of the articles in the operating
expenses is calculated at P8,000. The desired profit is P37,000. The selling price was
P100,000 which was
Recovery of:
Production cost P 50,000
Operating expenses 8,000
The law states zero-rated tax on exports (and certain other transactions)
“Export sales” – means the sales and actual shipments or exportations of goods from
the Philippines to a foreign country, irrespective of any shipping arrangement that may
be agreed up on which may influence or determine the transfer of ownership of the
goods so exported, and paid for in acceptable foreign currency or its equivalent in
goods or services, and accounted for in accordance with the rules and regulation of the
BSP.
Illustration 2-13. Mr. E exported exported his manufactured goods to F Co. in the
United States, under terms of shipment F.O.B. California, United States.
Payment was in dollars remitted thru the Philippine National Bank,
California, U>S>A>, branch.
Since title to the goods was transferred, and hence. The sale was
consummated, in the United States, the sale was export sale.
Illustration 2-14. G. Co. exported its manufactured goods to H Co. in the United States, under terms of
shipment F.O.B. Manila, Philippines. Payment was in dollars remitted thru the Philippine National Bank.,
California, USA, branch. Even as title to the goods was transferred, and hence, the sale was
consummated, in the Philippines, the sale was still an export sale.
Services Materials
Presumptive Transitional
Output Taxes
Unit Business Taxes
VALUE-ADDED TAX on SALE OF GOODS or
Module
PROPERTIES
Units 3hr Page | 7
AE25-BT BUSINESS TAXES
: s
Reference Book:
A study on Business Taxes and Transfer Taxes
under the Train Law
Virgilio D. Reyes Value-added tax payable
2018 Edition