— cussion Questions ‘What is consumption? Compare consumption tax to income tax. What are the types of consumption? Which type pays tax? Discuss the nature of business tax. Enumerate and describe the nature of each type of business tax Compare the VAT on importation to the business tax. ‘ Discuss the characteristics of the VAT on sales. compare the direct method to the tax credit method in VAT computation. piscuss the characteristics of the percentage tax. 40. Discuss the nature of excise tax. it Compare VAT on sales, percentage tax, and excise tax. st POEIAASsseg True or False 1 1. Consumption tax is a tax levied upon businesses. F " q purchase is a form of consumption. T 2 3, Atax on consumption will effectively causes all residents of the state to pay tax. 7 4, Consumption is the acquisition or utilization of goods and services, 5, Income tax is based on the taxpayers’ capacity to sacrifice for the support of the government. 7 6. Consumption tax is more consistent with the “ability to pay” theory rather than the “benefit received” theory. F 7. Atax on consumption would support savings initiative. T 8. Consumption taxes should not apply to basic necessities. T 9, Both domestic consumption and foreign consumption are subject to consumption tax. [= (0/44 amet) Non-resident sellers are exempt from. consumption taxes on their domestic 1 Ss sales, 11. Resident sellers shall pay consumption tax on foreign consumption. © 12. The sale by non-resident persons abroad is subject to Philippine consumption tax. F (re7/" The utilization or consumption sf goods or services shall be taxable in their country of origin. F (26°74 14, The sale by non-resident persons in the Philippines is exempt from consumption tax. 15. The sale by resident in the Philippines is subject to Sst tax. (wurines tt ai _ True or False 2 1. The consumption tax for purchases of goods or services sources shall be payable by the buyer. ; sh ie Business tax is a form of consumption tax. Consumption tax is a form of business tax. sj from foreign 11. introduction to Consumption Taxes Chapter 1— a n the sales of sellers which is the purchases made 7 4, Business tax is imposed o1 buyers. by bar on importation is payable only by those regularly engaged in trade or business. 6, Business taxes are pai the buyers. + 7, The statutory taxpayer and the economic taxpayer are the same with the VAT on importation. 8, Business taxes are usually included in the price of goods and services of the seller but are remitted by the seller to the government. 9. Inbusiness taxes, the statutory taxpayer is not the economic taxpayer, 10. The sales or importation of goods is not subject to specific percentage tax. 11. When the impact and incidence of taxation rests upon different persons, the tax is an indirect tax. 12. Domestic pay consumption tax to domestic sellers. 13. Importers pay consumption tax to non-resident sell 14. Domestic sellers pay consumption tax to the government. 15. Exporters pay consumption tax to the government, ‘id by sellers while the VAT on importation is paid by ers. Multiple Choice - Theory: Part 1.“ a or type of consumption will/pay consumption tax? Domestic consumption Foreign consumption c. Both domestic and foreign consumption d._ Neither domestic nor foreign consumption 2. Which is a tax upon the usage of income? ‘a Savings tax onsumption tax b. Investment tax d. Business tax 3. Which is subject to the VAT on importation? a. Foreign consumption from resident sellers b. Foreign consumption from foreign sellers Q Domestic consumption from resident sellers Domestic consumption from foreign sellers 12. 4. Which is subject to business tax? a. Foreign consumption from resident sellers b, Foreign consumption from foreign sellers Domestic consumption from resident sellers Domestic consumption from foreign sellers seis 10 aut ipxot 107 op oft 4 5. AS an incorrect statement regarding consumption taxes? They are always indirect in nature. - a b. They effectively tax everyone in the state. ee ag 12chapter 1 Introduction to Consumption Taxes «. They apply only when the goods or services i consumption within the Philippines. See 4. Consumption taxes may encourage savings formation. Which is correct regarding consumption tax? ,. Itmay help in the redistribution of wealth to society. pb. Itis entirely based upon the consumers’ ability to pay. ¢. Itapplies to both domestic and foreign consumption. ._ Itapplies only when the seller is non-resident. Domestic consumption is taxable when the seller is a. anon-resident. b. aresident. ¢) either a resident or a non-resident. 4, both a resident and anon-resident. g, Foreign consumption shall a. pay consumption tax if the seller is a resident. b._ pay consumption tax if the seller is a non-resident. not pay consumption tax if the seller is anon-resident. @ not pay consumption tax regardless of the residency of the seller. 9, The tax on domestic consumption is referred to as a. VATonimportation. (¢.Bither A or B b. Business tax. d. Neither A nor B The tax on domestic consumption from foreign suppliers is a. VATonimportation. c.Bither Aor B b. Business tax. d.Neither A nor B 1 11, The tax on domestic consumption from resident-suppliers is a. VAT on importation. c. Either A or B b.) Business tax. d. Neither A nor B 12. Which is not a business tax? a VATonimportation _ c. Percentage tax b. VAT on sales d. Excise tax I . The percentage tax is generally 3% of salesor receipts c. 3% of mark-up b. 3% of purchasés d.12% of mark-up 14. The VAT as a business tax is 2 12% of sales or receipts (12% of mark-up . 12% of purchases d. 3% of mark-up 42Chapter 1 — Introduction to Consumption Taxes ,, 15. The VAT on importation is a. 12% of sales ©. 12% of mark-up b. 12% of purchases d.3% of mark-up 16. Which form of consumption is tax-free? Sales to a resident (b) Sales to a non-resident ¢. Importation by an importer engaged in business d. Importation by an importer not engaged in business 17. As to incidence of tax, the VAT on importation is a form of 4) Direct tax c. Ad valorem tax b. Indirect tax 4. Specific tax 18. Which of these import consumptions is tax-free? a. Importation from a seller not engaged in trade or business b. Importation from a seller engaged in trade or business ¢.. Both AandB d., Neither A nor B 19. Which importation is subject to the VAT on importation? | a. Importation by a person engaged in business b.." Importation by a person not engaged in business e Both Aor B d. Neither A nor B 20. Who is the statutory taxpayer to the VAT on importation? a: Foreign seller c.Both A and B TAY a b. Domestic buyer d.None of these . 4 Multiple Choice - Theory: Part 2. 0~ sob noxmt oD AE 1. Generally, the tax basis of business tax is a 4 sales or receipts~ _¢. Either Aor B a b. purchase cost d. Both A and B eud 8 200 eb doled 8e 2. Who is the statutory taxpayer of business taxes?! 7 _ % E The seller who must be engaged in trade or business The seller, whether or not engaged in trade or business The buyer who must be engaged in trade or business re d. The buyer, whether or not engaged in trade ‘or business 2oendy too wee nomic taxpayers of consumption taxes are ee " Sellers who are engaged in trade or business b ors, whether or not engaged in trade or business cc. Buyers who are engaged in trade or business. . (6) Buyers, whether or not engaged in trade or business 14 3.Chapter 1 — Introduction to Consumption Taxes 4, What is the method used to determine the 1 VAT due and payable? a. Direct method (c.'ax credit method on b. Indirect method { Withholding method 5, Which statement is conceptually incorrect? ._ The buyer pays the consumption tax on his/her purchase to the seller (b,) The buyer pays the consumption tax to the government . Theseller pays the consumption tax to the government. 4, The seller collects consumption tax for the government 6. Which is correct? The sales to foreigners must include a business tax. The sales to residents must include a business tax. The purchase from abroad must include a business tax. All of these 7. The deduction from Output VAT is called a. Percentage tax Input VAT b. VATdueand payable “d. VAT on importation 8. Which isa pure form ofa sales tax? @) Percentage tax ¢c. Both A and B ‘B. Value Added Tax d. Neither A nor B 9. Statement 1: A business which pays VAT normally does not pay percentage tax. Statement 2: A business which pays percentage tax also pays VAT. Which statement is correct? a.) Statement 1 ¢. Both statements b. Statement 2 d. Neither statement 10. Which of the following business taxes applies only for domestic Consumption? @ VAT on sales c. Excise tax b. Percentage tax @all of these 11 Excise tax is paid by a Sellers Buyers S Importers or manufacturers «Seller or buyer depending on who agreed to pay the excise tax 1 2. Export sae is (select the incorrect one) (Exempt from percentage tax » Exempt from VAT 15rion Taxes jpter 1 Introduction £0 consumptior apie 1- ‘¢._ Exempt from excise tx 4. Allofthese ccna tax is always paid together with VAT or percentage 13, Statement 1 Ose tax is paid atthe point of sale ‘Statem statement is false? ae 5 YY sas creme i b [ Neither sta 7% b. Statement 2 14. Which is imposed with a tax of zero percent (0%)? All export sales & Tiport ales of VAT-registered taxpayers % Import sales of VAT-registered taxpayers 4. Exportsales of non-VAT registered taxpayers only © © ( 15. Which is not subject to excise tax? a. Sin products b. Non-essential commodities Food products , ah (Mineral products & . ono sri ale 16. The tax basis of consumption tax on foreign purchaseis 9 > 4 a. sales or receipts Either AorB 0! bobbi sala (B) purchase costs d. Both AandB ; anteuc Ak "oe consumption tax on domestic purchases is imposed la elerparecenty c. Either AorB ~ eae ae d.Both AandB- 18. Technically, the excise tax on the manufacture of only when the article is intended for \a) Domestic consumption » c.BothAandB) > b. Foreign consumption — d. Neither A nor B 19. Which is Correct with the VA’ a. Payable only when the eR nly when the foreign Tegardless of Payable only when the Tesi c Nv 1chapter 1 — Introduction to Consumption Taxes Multiple Choice -Problem Part 1 1. Free Company, a resident business, renders services to Mr, Erlwin, resident person who is not engaged in business, i Identify the statutory taxpayer and the type of consumption tax. a.) Free Company - Business tax b. Mr. Erlwin - VAT on importation c. Mr. Erlwin - Business tax d. Free Company - VAT on importation 2, Baliwag Company, a non-resident business, purchased P200,000 from Cauayan Company, a resident business. Which will pay the consumption tax on this transaction? Ca) Cauayan Company c. Both A and B b. Baliwag Company d. Neither A nor B 3. Heidenberg Corporation, a resident business, purchased P 100,000 goods from Kiwi Company, a non-resident business. Identify the statutory taxpayer and the type of consumption tax. a.) Heidenberg Company - Business tax b. Kiwi Company - business tax c. Heidenberg Company - VAT on importation Kiwi Company - VAT on importation 4. Mr. Cedric, an employee, sold his residential lot to Mrs. Corneto, a real Property dealer. Who is subject to consumption tax with respect to this transaction? ‘ a Mr. Cedric c.Aand B b. Mrs, Corneto @. Neither A nor B 5. Mr. Porma made a casual sale involving a car to Mrs. Tutyal, a resident buyer. Mr. Porma is not a car dealer. Who is subject to consumption tax? & Mr. Porma ¢, Both Mr. Porma and Mrs. Tutyal b. Mrs. Tutyal (@Neither Mr. Porma nor Mrs. Tutyal 6. Mr. Llama, an employee, imported a pair of shoes from Hongkong. Which consumption tax is he liable to pay? a. Business tax c. Both VAT on importation _d. None Kapederasyon, a charitable non-profit corporation, imports various office Plies from XG Manufacturing Industries in China. Which is correct? i Kapederasyon is exempt from VAT on importation. a Kapederasyon is subject to VAT on importation. a XG Manufacturing Industries is subject to business tax. Fon. XG Manufacturing Industries shall pay the VAT on the importation. 17chapter *~ Chapter 1— Introduction to Consumption Taxes ua jn the p a 46- f , Philippine market, p2 duces an excisable article for sale in the Phill 8 Mr ve ecw erect to Me, cavite’s business taxation? bp wi ar cavite is subject 0 either VAT or percentage tax an emir Cavite pays excise tax in ‘addition to VAT or percentage (aX D7. Assume 2) Mr. Cavite pays excise tax in addition to VAT and percentage tax ne on ee Gar, cavite will pay excise ta svithout regard to whether he is a VAT or ’ ‘i a non-VAT taxpayer. (b, 9, A person engaged in business is subject to 3% business tax. He has 48. Mr. Ce inventories of goods in his possession costing 77,600 which he intends to p1,200 sell to earn a mark-up of 25% of cost net of the 3% business tax; He shall import invoice the sale of the P77,600 goods at 79:100.0. AMIE YR a jee @) P100,000 .P.97,000 x b. PS b. P103,000 d.P 110,000 itiple C 10, A business wants to make a P10,000 profit from the sale of an inventory eo costing P30,000. The business is subject to 3% percentage tax, At what Basic Cas€ ‘ount shall the business invoice the sale? a 1. Abusil Sr §hee «Ce ean é 3 y d.P 38,800 ’ mp 11. Aperson who imports goods or ceri i bee a 43% properties will more likely pay Dome bi Bi ree tax on the importation Expor oe. on the importation ’ a e either 3% or 12% tax on the importation : Comp |. no consumption tax be a Pi 12. A person who is not regul : wt pe. art i : ery ; ofa property for P100,000.\ I eee made 2. In the a Htsvcs aeio0 | invoice price of the sale? consv i a ano d. Either Bor C “i - fa P . Alison is regularly et von . P a Value added ven sales of goods. He will pay ‘ b. Percentage tax onl} sd her AorB “oud Basic cas ly. d, Neither A nor B B. AW 14. Mr. Ventura is subject to 3' Me e ‘ 7206/000 durise © EUR Coe eee Ge ; xclu pease and paid P103,000 in ide Sate 7 O/T ‘ure] b. P3,000 e180 Meuse als i sicaltdasicae . P12,000 uo TAN Whar , taxpayer purchase 1 ae I and sold goods worth P140}000 oe PLGO ODD ty ay wy added” for VAT pi v7 0 for P180,000. What is the r a 200000 outa es , x * Wha i al b. P140,000 P8000 Os 18 aad @? 60,000 : ba a Srchapter 1 - Introduction to Consumption Taxes 6. Inthe immediately preceding problem, what is the 16. 7200,000 ©.P120,000 b. P140,000 C&P 180,000 basis of percentage tax? 47. Assuming the same data in the above problem, what is the basis of the VAT * on importation? 5 a., P200,000 c.P120,000 B00 b,) P140,000 4.P 80,000 18, Mr. Coroneti imported P300,000 equipment for business. use and a 1,200,000 car for personal use. What is the amount subject to the VAT on importation? Oe i cae a PO ¢.P 1,200,000 ee b. P300,000 @P 1,500,000 Multiple Choice ~ Problem Part 2 Basic Case 1 1. A business taxpayer had the following purchases and receipts; Import of goods or services PC190,000 Domestic purchase of goods or services 100,000 Domesticsales of goods and services” 150,000> - Export sales of goods or services 50,000 Compute the total amount ‘subject to consumption tax to the business. a P500,000 ¢.P350,000 b. P400,000 (€P340,000 'n the immediately preceding problem, determine the amount subject to consumption tax if the taxpayer is not engaged in business a 490,000 ¢.P200,000 adi, impart b P390,000 C&P190,000 °° Basic case 2 A VaT-registered taxpayer recorded the following sales and purchases, ‘xclusive of VAT, during the month: Sales P 300,000 Purchases 200,000 500100 'fs What would be the output VAT? OR ee a a P48,000 c.P24,000 P 36,000 4. P12,000 4 wististhe input VAT? 48,000 (©P24,000 4 0x 7 & P36.000 “a P12,000 ae? E Pr’? 19mption Taxes 7 jpter 1 - Introduction tO Consul gpk s 2am ae cha} ss What is the VAT payable? (612,000 3 36,000 ‘apo b. 24,000 densa eaxpayer paying 3% ae isa - OK xX | 6, Assuming the taxpayet 30 | © the percentage 12% 8 c.P 6,000 aie 12,000 4.P 3,000 ’ be P9,000 at | ions during the month: ee orded the following transactions ie ‘A business taxpayer rec aoe Total | 350,000 200,000 PS50,000 Sales 100,000 d b. Band (@None of these 15. Which of these agricultural products is not considered as being in its "original state? ~ a. Kopra ( Refined sugar b. Muscovado sugar d. Ordinary salt 16. By revenue regulation, which of the items below is not considered in original state? a. ) Marinated fish ¢, Frozen meat b. Dried fish d. Smoked fish 17. Which productis non-taxable with VAT on importation? \a. Fresh cow's milk cc. Butter b. Olive oil d. Parmesan cheese 45Chapter 2 — Value Added Tax on Importation 18. Which of the items below is taxable with VAT? © lie ‘ a. Shrink-wrapped meat c. Tetra-packed fresh fruit juice b. Vacuum-packed vegetables (d.\Canned fruits dda 19. Which is not considered as simple processing? f a. Freezing b. Stripping 20. The following advanced technological means of p: to alter the nature of agricultural marine food products their original state. Which is the exception? fi yosing| a Canning Plastic shrink wrapping Vacuum-packing d. Tetra-packing f7- . tt Multiple Choice: Theory - Other exempt importation : J compe a 1. Which is not exempt from VAT on importation? fe a. Importation of books vollol ot} to doi gp Importation of school supplies Siqmemae © Importation of magazines F a. Allofthese ges e (aa 2. Which importation is not VAT-exempt? a. Importation of personal and household effects of F Tesettle in the Philippines as j b. Importation of personal and household effects of forél a Tons permanently inthe Phllippiqas a us (©) Importation of personal and household which at @ customs duties "3 : d. Allofthese 1 opidwe ai sedi fe i Obie, a, 3. The importation of Professional instruments and im subject to VAT when the . Wi a volume is not in commercial quantity, a b. goods accompany the Person or arrive within b his/her arrival, : ic a anbortation involves vehicles and machineries: > d. Allofthese a ‘ daidw. or alge, 4. Which importation is exempt from VAT? a. Importation of books by a school b. Importation of books by a student Importation of books by a bookstore @ All of these ou 0 TAM, ai _ ross By aasods neemChapter 2 - Value Added Tax on Importation a : 5, The importation of which transport medium is exempt from VAT? a.) Seaor air c.AandB Land d. None imples of Transport vehicles: . * us B, Cars C.Vessels D. Aircraft Which of these is not exempt from VAT when imported? a. CandD c.All ofthese (8) AandB d. None of these 7 Which importer is exempt from VAT on. importation of fuel, goods and supplies? a. Domestic carriers b. International carriers ¢. Domestic carriers on their international operations @ Either B or C B Which of the following items. is subject. to. VAT on. importation-to an Jndividual who is intending to settle in the Philippines? a.) Vehicles b. Professional instruments ¢. Household effects d. Personal effects The importation of fuel, goods and supplies is not exempt from VAT when used in ) Domestic operation International shipping operations ¢ International transport operations ~ 4. Any of these 10. Which is vatable? r a Importation of life saving equipment ~ >. Importation of. safety or rescue equipment © Importation of Spare parts, steel or other metal plates for marine vessels, None of these 4. The fee Nf I aft fe . n of vessel or aircraft for domesti ions i ea 'stic operations is always VAT exempt. S. var, exempt if the im, @ i“ — Chapter 2 - Value Added Tax on Importation 12. The importation of fu Chapte! uels, goods and Supplies for domestic Shipping e 5 transport operations is bi a.) vatable. 49. Imp always VAT exempt. ‘ E a Vanle ifthe importer is a domestic carrier: ; Bw .”VAT-exemptifthe importer a domestic carrier, © i 13. The importation of farm’ machineries and equipment is exempt imported by 20. Whic a amember ofa cooperative, 2 OD b. atrader engaged in business, b. ¢ ©) anagricuttet cooperative, EE d. Aorc @v 14. Who has the burden of Proving exemption from VAT on importation? 21. Which a. The government ©. The seller como a. a ) Theimporter-buyer —g, Both A and c ib b. ft 15. Which isa qualified exempt importation? 2 a) Co @ Importation by a Cooperative of farm equipment im, Importation by a cooperative of rice f ¢ Importation of bo; le Multiple c} 4. "Importation of marine food products a I occcnis 16. Which is not a qualified exempt importation? in @ Importation of fuels or Supplies by a petson engaged in a eee transport operations 92ifeieer aay an Importation of fuels or Supplies by an international carrier — “Importation of cargo vessere and aircraft by those engaged i What ist transport Operations ta a Po Importation of cargo vessels and aircraft’ by’ those’ engaged b Pr2¢ international transport ©perations bot Oe Mr. A in 17. Which Of these is non-vatable? an 8eregati %, Purchase of services tom a foreign service Provider who is ™ uty by th engaged in business 3 HA Po > Purchase of B00ds from a foreign Service provider who is SO P44 business abroaq BE Abe 5) None of #Oeds from economic zone enterprises okstoy 18. Who shal] . 3 7 Boo] Subsequentyseyae VAT on acts Ot When’ a VAT bgemipe Og, 2 The exempt buyer "Ported article or 800ds to a Ron-exempt Schoo at ® Bas PON exem pt buyer Totay | SUPE Aandpapter 2 - Value Added Tax on Importation d. Neither AnorB Importation is not subject to VAT when a, made by a VAT-registered business. b. made by a non-VAT-registered business. itinvolves exempt goods. coursed through an exempt importer. ). Which is not included in landed cost? a. Dutiable value b, Custom’s duty c._ Excise tax . © VAT |. Which is not included in the landed cost? a. Purchase price b, All incidental cost of bringing the goods to the Customs warehouse Taxes other than VAT paid prior to the withdrawal of the goods 4.) Cost of transporting the goods from the Customs warehouse to the importer’s warehouse or residence lultiple Choice Problems 1 | Oceanizers, Inc. purchased the following from abroad: _ Sea shells and coral decor P 320,000 ~_ Tuna and salmon <=> food ™ o~jne dale a oy Total 2_440,000 What is the amount of taxable importation? a PO & 200,000 b. 120,000 <4. 320,000 » Mr. A imported various personal and household effects with a value aggregating P400,000. P320,000 of these was subjected to a 8% customs duty by the BOC. What is the VAT on importation? a Po ©. P42,240 ee St (0. 41472 . P48,000 - * A >ookstore company imported the following items: Books Landed cost 5 P 350,00 Professional instruments 000 4 School supplies 200,00 a ‘otal 49Chapter 2 - Value Added Tax on Importation A V— oy a Fes: Ins. + Scbool s apter 2 a is the total VAT on importation? x Nami compute a. PO c.P72,000 Ps fom 30 ) P.66,000 d.P108,000. "ols Ogni gp pb. P72 V ben eae 4, Mr.C,a VAT-registered food retailer, imported the following from Chi, mr. Huli love tt 4 the follo. yer! (a ae po 180,000" =iRaia Total inv ee oe ree Marinated milkfish ee poc an oc Compute : Po Compute the VAT on importation. ( t Piz a. PO c.P 51,600 . @® P 12,000 4. P 69,600 5. Alexis Furnitures, a percentage taxpayer, Se he following Corn grit Seas Hog feed Specialty Machineries, for business use Heating system, for home use Compute Total a PO i b. P36, Compute the VAT on importation. F a PO ; ©P 150,000 hoe 200 |. The follo} b. P27,000 4d, P 168,000" ee . Total iny 6. Danes AgriCorp imported the following: BOC char Sel Customs, ie Excise tay Fertilizers Farming equipment ' a pes Herbicides and pesticides BP iss Total pa Be Pas Compute the VAT on importation, a PO P7200 St K b. P42,000 (QP 84,000.) yen C1:200,0 ‘Ustom, 7. Home Appliance Company imported the following for p P 15 Furniture pat Rattanpter 2 — Value Added Tax on Importation ‘Compute the VAT on importation. (Gork + 2Edk + 40K) X a. P30,000 GP 156,000 b. P72,000 d. P 204,000 Mr. Huligan imported rice'from Vietnam. Details of his importation show the following: pice is exempt Total invoice value P "1,000,000 © £5" consamphon Freight and insurance in transit 50,000 4 BOC and other charges 20,000 mpute the VAT on importation. a.) PO ¢.P 126,000 b. P120,000 .P 128,400 ‘An agricultural supply dealer imported the following: Corn grits P 200,000 Hogfeeds 350,000 “ Specialty feeds» 300,000 5 y 12) - Compute the VAT on importation. a PO c. P42,000 (>. 36,000 .P 102,000 The following data relates to the importation of cigarettes by Mr. Shinto: Total invoice value P 1,000,000 -~ BOC charges 300,000~ | n>) Customs duties 200,000- (*'?* Excise taxes 300,000 Compute the VAT on importation. @ 120,000 "cP 180,000 b. P156,000 216,000 ple Choice - Problems 2 aa Pepito imported a harvester from the United States with a total cost of (4.400.000 before Customs duties. The importation is subject to 10% ' os duties, What is the VAT on importation? i, 2158400 c.P.129,600 » P145200 apo (W900 yofalO gh 1B 4 51—— Chapter 2 - Value Added Tax on Importation 'St9¢0, 2 » papter 2— In the immediately preceding problem, assuming that the made by an agricultural cooperative, what is the VAT on importation Mr. Bet a. 158,400 ‘cP 129,600 4 ae b. P144,000 (Po Bored exenpt ih Ml rate U Mr. Smile, a professional practitioner, imported the following: F coputk Galeulatorsand computersforhisfirm P 900,004... B P2i Books 3.65 yf 600,000 P22 Total 21,500,000 ‘ if an im] How much is subject to VAT on importation? 240% sinqenge 134,006 a PO ©.P 1,200,000 O4 ae importat (®) 900,000 4. P 1,500,000 a cee § ; b. P18, Mr. Juan Manuel Marquez arrived in the Philippines with an rat visa. He had with him the following: Shanum ( Invoice p Clothing, shoes, and apparel P- 100,000 Other cos Professional instruments and implements 150,000 BOC char; Personal car y eestor Total costs of personal belongings a Peso-Dolll Compute the total amount subject to VAT on importation, . be om : Compute a PO O00 an a a PO b. P200,000 4. P 550,000 voll adil b. Par Mr. Xhi, a non- : : a ou i, a non-VAT taxpayer, made the following, domestic 10. Be Doling a 5 as invoii im, i Purchase of serap metals from a PEZA-locator one Purchase of machine from a VAT supplier Insurance reight ‘What is the imposable VAT on importation? Wharfage ee ©.P-96,000 rrastre ¢] b) P24,000 4. P 120,000 Prokerage ; ACilitat), Atlantis Shipping Company j : : 2 ; y imported P Supplies for domestic use. ‘The aan 5 * seed Mr. Dotin, omestic use while 40% was reserved for tg Ustoms a What is the VAT on j ; a PO a eee # What is the b. P144,000 216,000 bP 255 f 4. 360,000 ieee 52japter 2 - Value Added Tax on Importation Mr. Beer, a VAT-registered trader, imported equipment with a dutiable value of $40,000 from abroad. The importation was subject to P100,000 BOC charges before 10% customs duties on dutiable value. The exchange rate to the Peso was P43.00: $1. ir a Ad, 20.0. 43x “|O/s mpute the VAT on importation. beh nee 4 P 218400 cP 232,400 +100,000, xX I b. P227,040 .P 239,040 if an importer paid 15% customs duties in the amount of P24,000 plus P134,000 charges to the Bureau of Customs, what is the VAT on importation? Bm oc a PO BP sa pee tamcomnemi7An= 44000 b. P18,960 (@P 38,160 QUOR BHR YBaeD x Ja Shanum Company had the following data regarding its importation: ail ones tax.0d Invoice price in US Dollars $ . 12000 x 42.20 #619000 Other costs to bring goods to the Philippines P 145,000 0 a Brokerage fee 8,000“ en Facilitation fee 5,000 a Dolinger was also assessed P 24,000 and P 18,000, respectively, for ‘toms duties and excise tax. The applicable exchange rate was P42.50:$1. Whatis the i VAT on importation? i 225500 (cP 35,100 P30,540 _/ 4.P35,700R 3: SELF-TEST EXERCISES sion Questions at is a business? at are the two essential requisites of a business? wuss the exceptions to the Regularity rule. fat is a taxable person in business taxation? jiscuss the registration requirements for businesses. “tare the two business classifications as to activities? What is the tax e on each type of business classification? Tain the concept of “gross selling price” and the concept of “gross eceipts.” iscuss the VAT threshold. at is the accounting period for pusinesses? Discuss the rules on the wusiness accounting period. jiscuss the difference in tax reporting of VAT taxpayers and non-VAT payers. escribe the scape of the VAT and the Percentage Tax. at is meant by the term “vatable”? ie or False- Part 1 \“~ Once employed, one cannot be considered engaged in business. ‘All sales by a businessman are considered made in the course of business. ‘Abusiness involves habitual engagement in a commercial activity. “Commercial activity” means provision of goods or services to the public for aprofit. To be construed as being engaged in business, one must be employed. A self-employed individual is engaged in business. An employee is not engaged in business. ; casual sales of properties are considered not made in the course of uusiness. The sale of ordinary assets by a busitiess is considered made in the course of business, mecseict capital assets by a business is also considered made in the in Pe being incidental | to business operations. as ‘ich is not Tegistered is exempt from business taxes. Se rae and instrumentalities and non-profit organizations or ae. ay be considered as businesses on their unrelated ; hence, these are subject to business tax. The absence of a profit motive may preclude an activity from being Considered as business. Govern: mel i i O6 SB sikubie agencies and instrumentalities and non-profit organizations or A compan ie generally considered as businesses, y director is considered to be engaged in business.—_ -_ Chapter 3 - Introduction to Business Taxation 3-Introdu | True or False - Part2 “* eee" Fi: Marginal income earners are exempt from both business tax ang Sellers of goods tax. Je on gross Se eof mas F > iga sale of servic Real estate brok Fe yan sale of serv’ tor isa Sing or distr B Dealers in securi F™ sellers of service "Fi0. The sale of el ‘companies is con: 4, The term gross se ‘Excise tax is part les returns and 4. Gross selling pric 5. Constructive rece: 16. Constructive rece seller of services v Only discounts d F 2. Anemployed professional is engaged in business, ‘T 3. Self-employed professionals rendering services to clients are . business, ‘ fF 4. Agents and brokers are considered as employees; hence, they considered engaged in business, * 1 5, Consultants and movie artists are considered engaged in bus 6 Businesses for mere subsistence are not considered business deca. are non-profit. 1/7. Businesses for mere subsistence have gross receipts not ex 100,000 per year. ; T 8 The owner of'a business for mere subsistence is called a ‘marginal ip earner. F 9. Aprofessional, consultant, or artist can ualify as a marginal income, as long as his receipts do not exceed P100,000 in any 12-month periog, ‘T 10. 4 sale made by a non-resident is Presumed to be made in the co business despite irregularity of sales transactions, r © 11. Anon-profit organization is subject to business tax on all Of its receipsy engages in activities subject to business tax. solat doses gross selling price. 12. Exemption from income tax means exemption from business tax. ihe. term “gross F 13: A non-profit organization will be exempt from busine: Unperformed jobs. 4 < TOSS receipts incl 0 Promissory Notes < 5 Prcustomers are p Purposes. » ‘T 14. An individual, Trust, estate, partnership, corporation, joint ; (operative or association will pay business tax. Sellers of goods are taxable On gross recei i taxable on gross selling price vPIS While sellers of services an The sale of radio, television, isa sale of service nota sale of goods or ‘ ; Properties, Real estate brokerage is considered a sale of goods o; than sale of services, (bOkers arty ne i/er 8004S OF Properties rather Acontractor is a seller of goods or property not ah a 0 a seller of se Leasing or distribution of cinematographic films is a sale oe Dealers in securities and lending investors are selle ‘ i" rs of good: sellers of services. SReRNeT than transmission and distribution roperties, fdr viet ) companies is considered sale of goods or p seller of services without restrictions. ; Only discounts determinable at the point of sale are deductible against {gross selling price. The term “gross receipts” includes client or customer advances for unperformed jobs. l Gross receipts include only cash received and excludes uncollected income. Promissory notes and other evidences of indebtedness submitted by clients or customers are part of gross receipts. ‘True or False Part 4 Non-VAT taxpayers pay their quarterly tax in three monthly payments. Loans or agency monies received by the business are part of gross receipts. Receipts that do not redound to the benefit of the taxpayer are not included in gross receipts. ‘ There are three types of business taxes: VAT, percentage tax and excise tax. There are two types of business taxpayers: VAT and Non-VAT taxpayers. = Normally, VAT and percentage tax are mutually exclusive. Excise tax is an addition to either VAT or percentage tax for businesses Manufacturing or importing excisable articles. ih The accounting period for business tax is called the taxable year. VAT taxpayers pay their quarterly tax in two monthly and one quarterly Payment. 1 quecter H The taxable quarters of an individual are patterned after that of the Calendar quarter. ' tax = The taxable quarters of a corporation adopting a fiscal year for income Purposes shall be synchronized with its fiscal year. ip Corporations pay quarterly VAT while individuals pay VAT annually. 83tax are subject to Vip) ppject to percentage “subjected to Fa kei other than exempt sales and services e Abre from goods ean Ta percentage tax ae vatable. jes automatically subject to VAT, §. Ase “yatable sales” means sonar a Ibject to percentage re cedata ; specticaly s ere receipts in the Pa 2 11,919,500 from whatever type of sales are subjectto Vay F3._Theterm T6 Al ‘who wishes to register as a VAT taxpayer despite not a, sale threshold is called a “registrable person. = Tay air pale is computed as output VAT less 3% petcentage tax ~~ Noné 8 aggregate sales or receipts from all sources (exempt, spe cs te ieee percentage tax, and others) exceed P3,000,000, which is subject to VAT. ¥ 9. Franchise grantees of radio or television broadcasting com exceeded P1,000,000 in annual sales must register as VAT ta > F 10. Persons who optionally register as VAT taxpayers can Cat Tegistration within three years. ‘T 11. Franchise grantees of television or radio broadcasting companies' ___ cancel their VAT registration. ¥ 12. Registrable Persons shall be subject to VAT. They shall pay benefit of an input VAT credit plus the percentage tax. q Multiple Choice - Theory: Part 1 S/ 1. Which of the followi ng entities below i ; 4 tli pone below is not considered as a busi b > with P500,000 annual sal oa Which © Resa stand with sales exceeding P100,000 Be hence, An employed pt el sales not exceeding P100,000 E Ex hot exceeding P100,o9g arning Part-time self-employment 1 Im be Aself-ey “employed ©) Apurel and employed ing © Aandp “"Pyed individual Uaypter 3 — Introduction to Business Taxation Which of the followin, sgistered business? Sale of goods Sale of services Sale of properties considered Sale of properties considered 1 is not subject to business tax even if made bya as ordinary assets as capital assets ich is not engaged in business? A corporate director Abroker ‘Anagent Asecurity dealer ich of these is least likely to be subjected to business tax? Sale of stocks held as inventory Sale of bonds held as inventory le of stocks held as investment None of these ich is considered engaged in business even if not regularly engaged in le? Anon-resident seller who exports to the Philippines An importer who imports goods into the Philippines Aseller who makes a one-time sale of real property Any seller who sells goods or services at a price above P100,000 during the year ich of the following are considered engaged in business? Government agencies _C. Sales agents Non-profit organization D. Consultants __ AandB c.BandC Cand D d. None of these ich of these is always presumed to be made in the course of business; lence, it is subject to business tax under the regulations? Export sales cc, Domestic sales Importation d. All of these fe business tax on exempt sales is VAT cAorB Percentage tax @.None of these fe consumption tax on importation is VAT c.AorB Percentage tax d. None of these 84ii Taxation jon to Business Chapter 3 Introduct! “a Chapter 3! ic sales ty yn tax on do) pene “The consumptio! /o)AorB d, Cash a VAT ‘d. None of these b, Percentage tax 49, Which is: ices specifically subject to percentage tay j, a. Bank sie or se d. None of these b. Tran: & Percentage tax contr i marginal income earner? c. Judie 13, Which s more likely to qualify 282 Bt servi cipeest (a. Bperator of a single unit tricycle mage colle 414, Statement 1: Sellers of goods are subject to percentage tax. 20. ae Statement 2: Sellers of services are subject to VAT. Avy Recei for th Which statement is correct? c. Recei a. Statement 1 Both statements d. Recei b. Statement 2 (Neither statement indet 15. Statement pares the husband and the wife are subject to either Multiple Cho percentage bet Statement 2: The husband may pay VAT while the wife may pay ey ; a a b. 12% Which statement is false? b ay ee Bath statement ¢, Statement 1 only Be ie ler statement d. Statement 2 only i | 2 Which m 16. Statement 1: rh zt iil a. Regul os joie taxpayer will pay an annual registration fe b. ene i employed taxpayer will pay an annual registrati! & Actua “ed statement is correct? sh Be) Both, a. Statement 1 : p foscene © Both statements ie . 4. Neither statement E Exem + The term “gross selling price” aubls a The contract Pilea tis excludes » & Subje 4 Discounts which are comers 801d , Seg & Delivery charges ‘gent upon future events 4. Sales returns and allowano, Aes es 3% pr 18, The term “gross receiny.» b. 129%) CS Reimbursements a, aed Ge 12% b. @ 1296 ‘ ust Reimbursements fy tS*°Mer expenses paid by thes ock ‘ocket expenses ii red by € “Advances made bythe cng aChapter 3 ~ Introduction to Business Taxation, . Cash collections for services rendered 49, Which is nota constructive receipt? . Bank deposits made available , ee ce to the service provider without p, Transfer of amounts retained by the payor to the account of the contractor-service provider ¢ Judicial consignation by the payor of the contract price which the * service provider wishes to donate to the payor (@ vollection of revenue for past services rendered 20, Which is part of gross receipts? ‘Amounts received which will be remitted to other persons Receipt of notice from a debtor to offset the consideration of the service for the debt of the service provider ¢. Receipt from bank loans 4. Receipt from issuance of stocks or issuance of certificates of indebtedness Multiple Choice - Theory: Part2 4, Anon-VAT registered service provider shall pay (a. 3% percentage tax on its gross receipts b. 12% VAT on its value added ¢. 12% VAT onits export sales or receipts d. 3% percentage tax on its export sales 2, Which must be present to construe the existence of a business? a. Regularity of transaction b. Offering of services or goods to the public for a profit ¢. Actual presence of profit during the period (4) Both Aor B 3. Aperson who made a one-time or casual sale of properties is Exempt from business tax. B. Subject to percentage tax. ©. Subject to value added tax. d. Subject to either percentage tax or value added tax. 4 AVAT-registered person shall pay @ 3% percentage tax and VAT b._ 12% VAT on its sales or receipts ©) 12% VAT on its value added d. 12% VAT on its export sales 87