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TAX-301 (VAT-Subject Transactions)
TAX-301 (VAT-Subject Transactions)
VAT-SUBJECT TRANSACTIONS
1. VAT-Subject Transactions
Transactions Tax Base
a. Sale of goods or properties in the course of trade or business Gross selling price
b. Sale of services and lease of properties in the course of trade or business Gross receipts
c. Importation Total landed cost
The rule of regularity, to the contrary notwithstanding, services as defined in the Tax Code rendered in the Philippines by non-
resident foreign persons shall be considered as being rendered in the course of trade or business.
3. Goods or properties
The term “goods or properties” refers to all tangible and intangible objects which are capable of pecuniary estimation and
shall include, among others:
a. Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business;
b. The right or the privilege to use patent, copyright, design or model, plan, secret formula or process, goodwill, trademark,
trade brand or other like property or right;
c. The right or the privilege to use any industrial, commercial or scientific equipment;
d. The right or the privilege to use motion picture films, films, tapes and discs; and
e. Radio, television, satellite transmission and cable television time.
8. Output VAT
a. Meaning of output tax Output tax means the value-added tax on sale or lease of taxable goods or properties or
services by any person registered or required to register.
b. Determination of output tax In a sale of goods or properties, the output tax is computed by multiplying the gross selling
price by the regular rate of VAT.
c. Exercises
1) Selling price, net of VAT, P120,000
2) Selling price, gross of VAT, P240,000
3) Sales per books, P100,000
4) Selling price including erroneous VAT, P110,000
d. Exercises
1) (Phil. CPA Modified) The Pastry Shop sells cakes and pastry items to well-known hotels around the Metro Manila area. The hotels
are allowed credit based on the track record of the hotels. The total amounts received or receivable from sales by the Pastry Shop
in April, 2021 were P224,000, including the value-added tax. Seventy-five percent (75%) of the sales are normally on account.
How much is the value-added tax on the sales for the month of April, 2021?
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VAT-SUBJECT TRANSACTIONS TAX-301
2) The following data are taken from sale of a real estate dealer on January 2, 2018:
Consideration in the Deed of Sale P5,000,000
Fair market value per tax declaration 4,800,000
Fair market value per BIR 5,200,000
Selling price of an adjacent lot sold on the same date 6,000,000
Payments on the consideration:
January 2, 2018 1,000,000
January 2, 2019 2,000,000
January 2, 2020 2,000,000
How much is the output tax for January 2, 2018, January 2, 2019 and January 2, 2020 using 12% VAT rate?
3) The following data are taken from the books of a dealer in securities:
Selling price, shares held as inventory P3,000,000
Selling price, shares held as investment 2,000,000
Acquisition cost, shares held as inventory 1,000,000
Acquisiton cost, shares held as investment 1,500,000
Other income, shares held as inventory 200,000
How much is the output tax using 12% rate?
4) A VAT-registered contractor has the following selected VAT exclusive data for the month of July 2021:
Collections from contracts completed in June, 2021 P500,000
Advances from contracts to be completed in August, 2021 300,000
Collections from contracts completed in July, 2021, net of 10% retention on billings transferred
by the payor to the account of the contractor 198,000
Materials charged with the services rendered, July, 2021 100,000
Payments for services rendered by a sub-contractor, July, 2021 200,000
How much is the:
a) gross receipts for the month of July, 2021?
b) output tax for the month of July, 2021 using 12% rate?
c. 5) A VAT-registered taxpayer has the following VAT-exclusive data for the month of January 2021:
Accounts receivable, January 1, 2021 P 500,000
Sales on account for the month of January 1,000,000
Cash sales for the month of January 300,000
Accounts receivable, January 31, 2021 700,000
Cash purchases for the month of January 2021 400,000
How much is the output tax for the month of January, 2018 using 12% rate assuming the taxpayer is a:
a) trader. b) service provider
5) Mr. Cris T. Rosales, not VAT-registered, imported an article from Japan for his personal use. The invoice value of the imported
article was Y1,000,000 (Y1=P0.35). The following were incurred in connection with the importation:
Insurance P15,000
Freight 10,000
Postage 5,000
Wharfage dues 7,000
Arrastre charges 8,000
Brokerage fees 25,000
Facilitation fee 3,000
The imported article was subject to P50,000 customs duties and to P30,000 excise tax. How much was the VAT on importation
using 12% rate?
b. Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a
signatory effectively subjects such sales to zero rate.
12. Zero-rated Sales of Goods or Properties which Shall be Subject to 12% VAT Upon Satisfaction of Certain
Conditions (under the TRAIN)
a. Items subject to the twelve percent 1) Sale of raw materials or packaging materials to a nonresident buyer for
(12%) value-added tax and no longer be delivery to a resident local export oriented enterprise to be used in
considered export sales subject to zero manufacturing, processing, packing or repacking in the Philippines of
percent (0%) VAT rate the said buyer’s goods and paid for in acceptable foreign currency and
accounted for in accordance with the rules and regulations of the
Bangko Sentral ng Pilipinas (BSP);
2) Sale of raw materials or packaging materials to export-oriented
enterprise whose export sales exceed 70% of the total annual
production;
3) Those considered export sales under the Omnibus Investment Code of
1987 (E. O. No. 226), and other special laws.
b. Conditions to be satisfied 1) Successful establishment and implementation of an enhanced
VAT refund system that grants refunds of creditable input tax
within ninety (90) days from the filing of the VAT refund
application with the Bureau.
To determine the effectivity of item no. 1, all applications filed from
January 1, 2018 shall be processed and must be decided within
ninety(90)daysfrom thefiling of the VAT refund application; and
2) All pending VAT refund claims as of December 31, 2017 shall be
fully paid in cash by December 31, 2019.
Exercises: Determine whether or not the following sales of goods are subject to regular VAT or zero-rate
Under TRAIN Under TRAIN
(2 conditions (2 conditions
not satisfied) satisfied)
a. Sale and actual shipment of goods from the Philippines to a foreign country, irrespective of
any shipping arrangement, paid for in acceptable foreign currency
b. Sale and actual shipment of goods from the Philippines to a foreign country, irrespective of
any shipping arrangement, paid for in Philippine peso
15. Zero-rated sales of Services and Lease of Properties which shall be subject to 12% VAT upon satisfaction of
Certain conditions (under the TRAIN)
a. Items subject to the twelve percent 1) Processing, manufacturing or repacking of goods for other persons
(12%) value-added tax and no longer doing business outside the Philippines which goods are subsequently
be considered export sales subject to exported where the services are paid for in acceptable foreign currency
zero percent (0%) VAT rate and accounted for in accordance with the rules and regulations of the
Bangko Sentral ng Pilipinas (BSP);
2) Services performed by subcontractors and/or contractors in processing,
converting, or manufacturing goods for an enterprise whose export
sales exceed 70% of the total annual production.
b. Conditions to be satisfied 1) Successful establishment and implementation of an enhanced
VAT refund system that grants refunds of creditable input tax
within ninety (90) days from the filing of the VAT refund
application with the Bureau.
To determine the effectivity of item no. 1, all applications filed from
January 1, 2018 shall be processed and must be decided within
ninety(90)daysfrom thefiling of the VAT refund application; and
2) All pending VAT refund claims as of December 31, 2017 shall be
fully paid in cash by December 31, 2019.
Exercises: Determine whether or not the following sales of services and lease of properteis are subject to regular
VAT or zero-rate
Under TRAIN Under TRAIN (2
(2 conditions conditions
not satisfied) satisfied)
a. Processing, manufacturing or repacking of goods for other persons doing
business outside the Philippines which goods are subsequently exported paid
for in acceptable foreign currency
Sales of locally manufactured or assembled goods for household and personal use to
Filipinos abroad and other non-residents of the Philippines as well as returning
Overseas Filipinos under the Internal Export Program of the government paid for in
convertible foreign currency and accounted for in accordance with the rules and
regulations of the BSP shall also be considered export sales.
Exercises: Detemine whether or not the VAT can be passed-on and the treatment of the passed-on VAT.
Can pass on VAT? Treatment
a. Sale by a VAT-registered seller to a VAT-registered trader
b. Sale by a VAT-registered seller to a VAT-exempt trader
c. Sale by a VAT-registered seller to IRRI
d. Sale by a VAT-registered seller to Development Bank of the Philippines
e. Sale by a VAT-exempt seller to a VAT-subject trader
The Commissioner of Internal Revenue shall determine the appropriate tax base where the gross selling price is unreasonably lower
than the actual market value (lower by more than 30% of the actual market value).
Exercises:
1) Determine whether the following qualify as VAT-subject deemed sale transactions or not (Y/N)
a. VAT-registered person withdraws goods from his business for his personal use
b. Property dividends which constitute stocks in trade or properties primarily held for sale or lease declared out of
retained earnings
c. Consigned goods returned by the consignee within the 60-day period
d. Goods on hand when a single proprietorship incorporates
e. Proprietor of a single proprietorship sells his entire business
f. Goods on hand upon the dissolution of a partnership and creation of a new partnership which takes over the business
2) Determine whether the following transactions involving change in or cessation of status are subject to VAT or not
(Y/N)
a. Goods on hand when a VAT-registered person engaged in a taxable activity like wholesaler or retailer who decides to
discontinue such activity and engages instead in life insurance business or in any other business not subject to VAT
b. Unused supplies or materials when a request for cancellation of registration due to reversion to exempt status was
approved
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VAT-SUBJECT TRANSACTIONS TAX-301
c. Capital goods at the time of approval of a request for cancellation of registration of one who commenced business with
the expectation of gross sales or receipts exceeding P3,000,000.00, but who failed to exceed this amount during the
first twelve months of operation.
d. Goods or properties existing as of the change of control of a corporation by the acquisition of the controlling interest of
such corporation by another stockholder (individual or corporate) or group of stockholders.
e. Stock-in-trade existing upon change in the trade or corporate name of the business
f. Goods on hand upon merger or consolidation of corporations
g. Exchange of goods or properties including real properties used in business or held for sale or lease by the transferor,
for shares of stocks, whether resulting in corporate control or not
g. Differences Between Sale of Goods or Properties and Sale of Services or Lease of Properties
Sale of Goods or Properties Sale of Services or Lease of Properties
a. Tax base Gross selling price (accrual basis) Gross receipts (cash basis)
b. Sources of output a. Actual regular sales a. Actual regular sales
tax b. Actual zero-rated sales b. Actual zero-rated sales
c. Deemed sales
h. Caselets
a. a. The following information taken from the books of a VAT-registered enterprise was provided to you:
Domestic sales of goods P3,000,000
Sales of packaging materials to an export oriented enterprise whose export sales exceed 70% of the
total annual production 2,000,000
Local sales of goods to Asian Development Bank (ADB) 500,000
Consignment of goods (not returned within 60 days following the date of consignment) 200,000
Consignment of goods (returned within 60 days following the date of consignment) 150,000
Goods transferred for the personal use of the owner (cost is P90,000), market value 100,000
Goods transferred to creditor as payment of debt of the enterprise (cost, P100,000) marlet value 90,000
Goods transferred to owners as share in the profit of the enterprise, market value 80,000
b.
How much was the total taxable sales and the output VAT using 12% rate?
b.
b. A VAT subject real estate dealer sold a residential lot. The following information was made available on the terms of the sale:
Gross selling price P3,000,000
Down payment, January 15, 2021 900,000
Balance to be paid in equal installment starting February 15, 2021 2,100,000
Zonal value 2,800,000
Value per tax declaration 2,500,000
Selling price of an adjacent lot 3,200,000
Question 1 – Does the sale qualify under installment sale? Why or why not?
2 – How much is the tax base for VAT purposes?
3 - How much is the output VAT on January 15, 2021 using 12% tax rate?
4 – How much is the output VAT on February 15, 2021 using 12% tax rate?
c. A VAT-registered corporation has the following data taken from the books of accounts for the first calendar quarter of 2021:
Gross sales P 5,000,000
Sales returns and allowances 100,000
Sales discount given at the time of sale 400,000
Sales discount given to cover prompt payment 200,000
Sales allowance to cover roll back in prices 120,000
Cost of sales 1,500,000
Office equipment purchased January 1, 2021 1,100,000
Vehicle for land transport imported January 1, 2021 2,500,000
Purchase of goods for sale, (included in the cost of sales above) 300,000
Operating expenses (40% with passed-on VAT) 500,000
Office supplies purchased (wholly used) 90,000
VAT payments for January and February 40,000
Using BIR Form No. 2550Q how much is the taxable sales (line 19A) and the output VAT (line 19B)?
d. A VAT-registered service contractor has the following data for the month of January, 2021:
Cash received for buildings completed on January 2018 with a contract price of P5,000,000 P3,800,000
Cash advances received for building to be constructed on February, 2021 300,000
Cash received from VAT-registered supplier on materials returned to the supplier 100,000
Cash received from owners of building for materials charged with the services 1,000,000
Cash received from owners of building to be used to pay building permit fees 200,000
Cash received from VAT-registered sub-contractors for overpayments 300,000
Payments to subcontractors for the electrical job 500,000
Purchase of supplies and materials used in the construction 100,000
Using BIR Form No. 2550M how much is the gross receipts for the month (line 16A) and the output tax (line 16B) using 12% VAT?
The imported article was subject to P500,000 customs duties and to P300,000 excise tax. After the release from the Bureau of
Customs, Candice Corp. paid P50,000 (net of VAT) for trucking to a warehouse in Quezon City. It also paid warehousing rent of
P80,000, net of VAT.
Question 1 – How much are the total charges prior to release from Customs custody?
2 – What is the tax base of the VAT on this importation?
3 – How much is the VAT on importation?
4 – Assuming Candice Corporation is not VAT-registered, will it be required to pay the VAT on importation? Why or why
not?
END
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