Villegas - Tax2 - Prelim Module-Ivisan - Bsa 3 - A and B

COLLEGE OF SCIENCE AND TECHNOLOGY
Cagamutan Norte, Leganes, Iloilo - 5003

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Email Address : svcst_leganes@yahoo.com
COO – FORM 12
SUBJECT TITLE: BUSINESS TAXATION

INSTRUCTOR : MS. JENNIFER M. VILLEGAS, CPA
SUBJECT CODE: TAX 2
Topic 1 – Overview of Value Added Tax
LEARNING OBJECTIVES:
At the end of chapter, the students are expected to:
1. Define business tax

2. Define Value Added Tax.
3. Determine the Nature of Value Added Tax.
4. Determine who is liable to pay the Value Add Tax.
5. Analyze the meaning of in the course of trade or business.
6. Determine how to compute the value added tax payable.
7. Discuss the characteristic of VAT.
8. State the types of transfer and the types of business tax.
NOTES:
1.1. What is Business Taxes?
Business taxes are those imposed upon onerous transfers such as sale, barter,
exchange and importation. It is called as such because without a business pursued
in the Philippines (except importation) by the taxpayer business taxes cannot be
applied. Business taxes are in addition to income and other taxes paid unless
specifically exempted.
1.2. What are the types of transfer?
1. Gratuitous Transfer (transfer without consideration) – not subject to business tax but
subject to transfer taxes (donor’s tax or estate tax).
2. Onerous transfer ( transfer with consideration):
A. In the ordinary course of trade of business including incidental transactions
– subject to business tax (either vat or percentage tax plus excise tax, if
applicable) and income tax, unless exempt.
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B. Not in the course of trade or business – not subject to business tax but may
be subject to income. ( Isolated/casual transactions made by residents)
Isolated transactions by non- residents on services rendered in the Philippines
are considered in the ordinary course of trade or business, thus, subjected to
Final withholding tax.
1.3. What are the types of business taxes?

There are three major business taxes in the Philippines, namely:
A. Value Added Taxes (VAT)

B. Other Percentage Taxes (OPT)
C. Excise Taxes
1.4. What is VALUE ADDED TAX?
Value Added Tax (VAT) is a tax on consumption levied on the sale, barter,
exchange or lease of goods or properties and services in the Philippines and on
importation of goods into the Philippines.
The seller is the one statutorily liable for the payment of the tax but the amount
of the tax may be shifted or passed on to the buyer, transferee or lessee of the goods,
properties or services. However, in the case of importation, the importer is the one
liable for the VAT.
VAT is a tax on the value added by every seller to the purchase price or cost in
the sale or lease of goods, property or services in the ordinary course of trade or
business as well as on importation of goods into the Philippines, Whether for personal
or business use, It is a tax on consumption levied on the sale, barter, exchange or
lease of goods or properties and services in the Philippines (cross border doctrine) and
on importation of goods into the Philippines levied at each stage of production and
distribution process "Cross border doctrine" means that no VAT shall be imposed to
form part of the cost of goods destined for consumption outside the territorial border
of the Philippine taxing authority.
1.5. Who is liable to pay the VALUE ADDED TAX?
Any person who, in the course of his trade or business, sells, barters, exchanges
or leases goods or properties, or renders services, and any person who imports goods,
shall be liable to VAT under the Tax Code.

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However, in the case of importation of taxable goods, the importer, whether an

individual or corporation and whether or not made in the course of his trade or
business, shall be liable to VAT under the Tax Code.
1.6. What is mean by in the course of trade or business?
The term in the course of trade or business means the regular conduct or pursuit
of a commercial or economic activity, including transactions incidental thereto, by any
person regardless of whether or not the person engaged therein is a non-stock, non-
profit private organization (irrespective of the disposition of its net income and whether
or not it sells exclusively to members or their guests), or government entity.
Non-resident persons who perform services in the Philippines are deemed to be

making sales in the course of trade or business, even if the performance of services is
not regular.
Illustrations:
Determine which of the following transactions are considered sale in the ordinary
course of trade, consequently subject to business tax
1. Pedro sold his 3-year old sedan to Ana for P400,000.
2. Abe Corporation, distributor of appliances, sold TV units from its inventory to
various malls in Metro Manila.
3. An auditing firm rendered audit and tax services to its clients.
4. Ana sold some of her jewelry for P50,000 to her best friend, Lorna
1.7. What is the nature of VALUE ADDED TAX?
Value Added Tax is an indirect tax and the amount of tax may be shifted or
passed on to the buyer, transferee or lessee of the goods, properties or services.
1.8. How to compute the value added tax payable?
The corresponding liability on value added tax, as presented in the previous

chapter, is generally computed as follows:
Output Tax (Sales or Receipts x 12%) XX
Less: Input Vat (Purchases of Goods or Services x 12%) (XX)
Vat Payable (Excess Input Vat) XX
Output tax means the VAT due on the sale, lease or exchange of taxable goods
or services by any person registered or required to register.
Input tax means the Vat on or paid by a Vat- registered on importation of goods
or local purchase of goods, properties or services, including lease or use of property in

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the course of his trade or business. It shall also include the transitional input tax and
the presumptive input tax. It should be supported by receipts.
1.9. What are the characteristics of VAT?
 It is an indirect tax where tax shifting is always presumed.

 It is consumption-based.
 It is imposed on the value-added in each stage of production and distribution process.
 It is a credit-invoice method value-added tax (tax credit approach).
1.10. What are kinds of VAT?

1. VAT on sale of goods or properties
2. VAT on importation of goods
3. VAT on sale of services and use or lease of properties.
Exercises:
1. Which of the following taxes describes a value-added tax?
a. Income tax c. Indirect tax

b. Sales tax d. Personal tax
2. It is the value-added tax due on the sale of taxable goods, property and services by any
person whether or not he has taken the necessary steps to be registered.
a. Excise tax c. Input tax

b. Indirect tax d. Output tax
3. Under the National Internal Revenue Code, which of the following is not considered as a
business tax?
a. Income tax c. Percentage tax

b. Value-added tax d. Excise tax
4. Statement 1: Any person who imports goods for personal consumption or use is subject
to VAT.
Statement 2: For the imposition of VAT, services rendered in the Philippines by
nonresident foreign persons are considered rendered in the course of trade or business,
regardless of regularity.

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a. Only statement 1 is correct c. Both statements are correct

b. Only statement 2 is correct d. Both statements are wrong
5. In the course of trade or business, for VAT purposes, means the regular conduct or pursuit
of a commercial or an economic activity by the following persons, except:
a. Person engaged in business

b. Non-stock, non-profit private organization
c. Government entity
d. None of the above
6. Statement 1: The term “output tax” means the value-added tax due from or paid by a
VAT-registered person in the course of his trade or business on importation of goods or
local purchase of goods or services, including lease or use of property, from a VAT-
registered person.
Statement 2: The term “input tax” means the value-added tax due on the sale or
lease of taxable goods or properties or services by any person registered or required
to register.
7. Which of the following is subject to 12% VAT?
a. Non-life insurance companies c. Life insurance

b. Crop insurances d. Answer not given
8. Statement 1: A person subject to excise tax is also subject to value added tax;
Statement 2: A person subject to percentage tax is also subject to value added tax.
a. Both statements are correct;

b. Both statements are wrong;
c. The first statement is correct but the second statement is wrong;
d. The first statement is wrong but the second statement is correct.
9. Which is correct?
a. Without a business pursued in the Philippine (except importation) by the
taxpayer, value added tax cannot be imposed.
b. “In the course of trade or business” means the regular conduct or pursuit of
a commercial or an economic activity, including transactions incidental
thereto, by any person regardless of whether or not the person engaged
therein is a non-stock non – profit private organization or government.

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c. Services rendered in the Philippines by a non-resident foreign person shall be

considered as being rendered in the course of trade or business even the
performance is not regular.
d. All of the above.
10. Which statement is false? Transactions considered “ in the course of trade or business”,
and therefore subject to business taxes include:
a. Regular conduct or pursuit of a commercial or an economic activity by a stock
private organization.
b. Regular conduct or pursuit of a commercial or an economic activity by a non-
stock, non-profit private organization.
c. Isolated services in the Philippines by non-resident foreign persons.
d. Isolated sale of goods or services for a gross selling price or receipts of
P950,000.
11. Which of the following is/are correct?
I. Persons whose transactions are exempt from the value added tax under
section 109 because their gross sales/ and or receipts do not exceed
P3,000,000 may voluntarily apply for registration under the VAT system.
II. A taxpayer who is subject to percentage on his gross receipts will also be
subject to income tax on his net income.
a. I and II c. II Only
b. I Only d. Neither I nor II
12. Which of the statements is correct?

a. The seller of the goods/services is the one statutorily liable to pay VAT.
b. The burden of the tax is borne by the final consumer although the producers
and suppliers of these goods and services are the ones who have to file their
VAT returns to the Bureau of Internal Revenue. Hence, what is transferred or
shifted to the consumers is not the liability to pay the tax but the tax burden.
c. Both a and b.
d. Neither a nor b.
End of Topic 1.

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Topic 2 – VAT on Sale of Goods and Properties, Importation and Sale

of Services
1. Define Value Added Tax on Sale of Goods or Properties.

2. Define transaction deemed sale.
3. Discuss the transaction deemed sale.
4. Discuss the VAT on importation.
5. Explain the VAT on Sale of Service.
6. Determine sale of goods, properties and services subject to VAT.
NOTES:
2.1. What is the Value-added Tax on Sale of Goods or Properties?
Goods or properties include all tangible and intangible objects that are capable
of monetary estimation. To be subject to business tax, the sale must be related to
business or trade. The sale should be consummated in the Philippines regardless of the
terms of payment made between the contracting parties.
Rate and Base of Tax
12% of the Gross Selling Price
Gross selling price means the total amount of money or its equivalent which the
purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or
exchange of the goods or properties, excluding VAT. The excise tax, if any, on such
goods or properties shall form part of the gross selling price.
The term goods and properties means all intangible and tangible objects which are
capable of pecuniary estimation and shall include, among others:
a. Real property held primarily for sale to customers or held for lease in the
ordinary course of trade or business
b. The right or 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 motion picture films, films, tapes, and discs
d. Radio, television, satellite transmission and cable television time.

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SALE OF REAL PROPERTIES
Sale of real properties shall refer to real properties held primarily for sale to
customers or held for lease in the ordinary course of trade or business of the seller in
the case of sale of real properties on the installment plan, the real estate dealer shall
be subject to VAT on the installment payments, including interest and penalties,
actually and/or constructively received by the seller
2.2. What are the Transactions deemed sale?
Certain transactions which are not actually sales because of the absence of actual
exchange between the buyer and the sell, are considered or included in the term sale
for value added tax purposes. For deemed sale transaction, the taxable base is the
market value of such goods as of the occurrence of the transaction considered as sale.
In transaction deemed sale, the input vat was already used by the seller as a credit
against the output tax. However, since there was no actual sale, no output vat is
actually charged to customers. Consequently, the state will be deprived of its right to
collect the output vat. To avoid a situation where a vat registered taxpayer avail of the
input vat credit without being liable for the corresponding output vat, certain
transactions should be considered sales even in the absence of actual sales.
The following transactions shall be deemed sale:
1. Transfer, use or consumption not in the course of business of goods or properties

originally intended for sale or for use in the course of business;
2. Distribution or transfer to:
a. Shareholders or investors as share in the profits of the VAT-registered persons; or
b. Creditors in payment of debt;
3. Consignment of goods if actual sale is not made within 60 days following the date such
goods were consigned
4. Retirement from or cessation of business, with respect to inventories of taxable goods
existing as of such retirement or cessation.
The VAT shall not apply to goods or properties existing as of the occurrence of the following:
1. Change of control of a corporation by the acquisition of the controlling interest of such

corporation by another stockholder or group of stockholders.
2. Change in the trade or corporate name of the business;
3. Merger or consolidation of corporations. The unused input tax of the dissolved
corporation, as of the date of merger or consolidation, shall be absorbed by the
surviving or new corporation.

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2.3. What is the effect of Sales Returns, Allowances and Sales Discounts in computing VAT?
The value of goods or properties sold and subsequently returned or for which
allowances were granted by a VAT-registered person may be deducted from the gross
sales or receipts for the quarter in which a refund is made or credit memorandum or
refund is issued. Sales discount granted and indicated in the invoice at the time of sale
and the grant of which does not depend upon the happening of a future event may be
excluded from the gross sales within the same quarter it was given.
2.4. What is the Value-added Tax on Importation of Goods?
12% of the Total Value
Total Value means the total value used by the Bureau of Customs in determining tariff
and customs duties, plus customs duties, excise taxes, if any, and other charges.
Where the customs duties are determined on the basis of the quantity or volume of the
goods, the value-added tax shall be based on the landed cost plus excise taxes, if any.
Transfer of Goods by Tax-exempt Persons.
In the case of tax-free importation of goods into the Philippines by persons,

entities or agencies exempt from tax where such goods are subsequently sold,
transferred or exchanged in the Philippines to non-exempt persons or entities, the
purchasers, transferees or recipients shall be considered the importers thereof.
2.6. What is the Value-added Tax on Sale of Services and Use or Lease of Properties?
12% of Gross Receipts
The term sale or exchange of services means the performance of all kinds of services in the
Philippines for others for a fee, remuneration or consideration, including those performed or
rendered by :
1. Construction and service contractors
2. Stock, real estate, commercial, customs and immigration brokers;

3. Lessors of property, whether personal or real;
Lease of property shall be subject to VAT regardless of the place where the
contract of lease or licensing agreement was executed if the property leased
or used is located in the Philippines.

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4. Warehousing services;
5. Lessors or distributors of cinematographic films;
6. Persons engaged in milling, processing, manufacturing or repacking goods for
others;
A miller, who is a person engaged in milling for others (except palay into rice,
corn into corn grits, and sugarcane into raw sugar), is subject to VAT on sale of
services.
7. Proprietors, operators or keepers, of hotels, motels, rest houses, pension
houses, inns, resorts;
8. Proprietors or operators of restaurants, refreshment parlors, cafes and other
eating places, including clubs and caterers;
9. Dealers in securities;
Dealer in securities means a merchant of stock or securities, whether an
individual partnership or corporation, with an established place of business,
regularly engaged in the purchase of securities and their resale to customers,
that is, one who as a merchant buys securities and sells them to customers with
a view to the gains and profits that may be derived therefrom.
10. Lending investors;
Lending investor includes all persons other than banks, non-bank financial
intermediaries, finance companies and other financial intermediaries not
performing quasibanking functions who make a practice of lending money for
themselves or others at interest.
11. Transportation contractors on their transport of goods or cargoes, including
persons who transport goods or cargoes for hire and other domestic common
carriers by land relative to their transport of goods or cargoes;
12. Common carriers by air and sea relative to their transport of passengers, goods
or cargoes from one place in the Philippines to another place in the Philippines;
13. Sales of electricity by generation companies, transmission, and distribution
companies;
14. Services of franchise grantees of electric utilities, telephone and telegraph, radio
and/or television broadcasting and all other franchise grantees, except franchise
grantees of radio and/or television broadcasting whose annual gross receipts of
the preceding year do not exceed P10,000,000.00, and franchise grantees of
gas and water utilities;
15. Non-life insurance companies (except their crop insurances);
16. Similar services regardless of whether or not the performance thereof calls for
the exercise or use of the physical or mental faculties.
The phrase sale or exchange of services also includes:

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1) The lease or the use of or the right or privilege to use copyright, patent, design or
model, plan, secret formula or process, goodwill, trademark, trade brand or other
like property or right;
2) The lease or the use of, or the right to use of any industrial, commercial or
scientific equipment;
3) The supply of scientific, technical, industrial or commercial knowledge or

information;
4) The supply of any assistance that is ancillary and subsidiary to and is furnished as
a means of enabling the application or enjoyment of any such property, or right as
is mentioned in subparagraph (2) or any such knowledge or information as is
mentioned in subparagraph (3);
5) The supply of services by a nonresident person or his employee in connection with

the use of property or rights belonging to, or the installation or operation of any
brand, machinery or other apparatus purchased from such nonresident person;
6) The supply of technical advice, assistance or services rendered in connection with

technical management or administration of any scientific, industrial or commercial
undertaking, venture, project or scheme;
7) The lease of motion picture films, films, tapes and discs; and
8) The lease or the use of or the right to use radio, television, satellite transmission
and cable television time.
Gross receipt refers to the total amount of money or its equivalent representing the
contract price, compensation, service fee, rental or royalty, including the amount charged
for materials supplied with the services and deposits applied as payments for services
rendered and advance payments actually or constructively received during the taxable
period for the services performed or to be performed for another person, excluding VAT.
Constructive receipt occurs when the money consideration or its equivalent is placed at
the control of the person who rendered the service without restrictions by the payor. The
following are examples of constructive receipts;
a) Deposit in banks which are made available to the seller of services without
restrictions.
b) Issuance by the debtor of a notice to offset any debt or obligation and acceptance
thereof by the seller as payment for services rendered
c) Transfer of the amounts retained by the payor to the account of the contractor.

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Exercises:
1. Statement 1: Gross selling price means the total amount of money or its equivalent
which the purchaser pays or is obligated to pay to the seller in consideration of the
sale, barter or exchange of the goods or properties excluding VAT.
Statement 2: The excise tax, if any, on such goods or properties shall form part of
the gross selling price.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect.
2. The following are transactions deemed sale for VAT purposes. Which is not?
a. Transfer, use or consumption not in the course of business of goods or

properties originally intended for sale or for use in the course of business;
b. Distribution or transfer to stockholders of share in the profits of VAT registered
person;
c. Distribution or transfer to heirs of decedent;
d. Distribution or transfer to creditors in payment of debt;
3. The following transactions are subject to VAT except:
a. Transfer, use or consumption not in the course of business of goods or

properties originally intended for sale or for use in the course of business;
b. Distribution or transfer to stockholders of share in the profits of VAT registered
person;
c. Distribution or transfer to creditors in payment of debt;
d. Consignment sales.
4. Statement 1: “Gross Selling Price”, for VAT purposes, means total amount of money
or its equivalent which the purchaser pays or is obligated to pay to the seller in
consideration of the sale, barter or exchange of the goods or properties, including the
value-added tax.
Statement 2: The excise tax on the goods or properties shall form part of the gross selling
price, for VAT purposes.


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5. In the case of tax-free importation of goods into the Philippines by persons, entities or
agencies exempt from tax where such goods are subsequently sold, transferred or
exchanged in the Philippines to non-exempt persons or entities:
a. The purchasers, transferees or recipients shall be considered the importers

thereof and shall be liable for VAT on such importation
b. The purchasers, transferees or recipients shall be considered the importers
thereof but not liable for VAT.
c. The purchasers, transferees or recipients shall be not considered the importers
thereof.
d. None of the above
6. What is the tax base for VAT on importation of goods?

a. Total value used by the Bureau of Customs in determining tariff and customs
duties
b. Total value used by the Bureau of Customs in determining tariff and customs
duties plus customs duties, excise taxes and other charges;
c. Total value used by the BIR in determining the internal revenue taxes
d. Total value used by the BIR in determining the internal revenue taxes plus
customs duties.
End of Topic 2.

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Topic 3 – Zero – rated / effectively zero- rated
1. Define zero-rated sale / effectively zero-rated sale.

2. Determine the transactions subject to zero rated sale of goods.
3. Determine the transactions subject to zero rated sale of services.
NOTES:
3.1. What is mean by zero-rated sale / effectively zero-rated sale?
A zero-rated sale of goods or properties (by a VAT-registered person) is a taxable

transaction for VAT purposes, but shall not result in any output tax. However, the input
tax on purchases of goods, properties or services, related to such zero-rated sale, shall
be available as tax credit or refund in accordance with these Regulations.
The term effectively zero-rated sale of goods and properties refers to the local sale of
goods and properties by a VAT-registered person to a person or entity who was
granted indirect tax exemption under special laws or international agreement.
3.2. What are subject to zero rated sale of goods?
The following sales of goods by VAT-registered persons shall be subject to 0% rate:
a. Export Sales. – The term ‘export sales’ means:
1) The sale and actual shipment of goods from the Philippines to a foreign
country, irrespective of any shipping arrangement that may be agreed upon
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
regulations of the Bangko Sentral ng Pilipinas (BSP);
2) Sale and delivery of goods to:
 Registered enterprises within a separate customs territory as

provided under special laws; and
 Registered enterprises within the tourism enterprise zones as
declared by the Tourism Infrastructure and Enterprise Zone Authority
(TIEZA) subject to the provisions under RA No. 9593 or The Tourism
Act of 2009.
3) Sale of raw materials or packaging materials to a nonresident buyer for

delivery to a resident local export-oriented enterprise to be used in
manufacturing, processing, packing or repacking in the Philippines of the
said buyer’s goods and paid for in acceptable foreign currency and accounted

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for in accordance with the rules and regulations of the Bangko Sentral ng
Pilipinas (BSP);
4) Sale of raw materials or packaging materials to export-oriented enterprise

whose export sales exceed 70% of total annual production;
5) Those considered export sales under Executive Order No. 226, otherwise
known as the Omnibus Investment Code of 1987, and other special laws;
and
6) The sale of goods, supplies, equipment and fuel to persons engaged in

international shipping or international air transport operations: Provided,
That the goods, supplies, equipment and fuel shall be used for international
shipping or air transport operations.
Provided, That subparagraphs (2), (3), and (5) hereof shall be subject to the 12%
value added tax and no longer be considered export sales subject to 0% VAT rate
upon satisfaction of the following conditions:
1) The successful establishment and implementation of an enhanced VAT
refund system that grants refunds of creditable input tax within 90 days
from the filing of the VAT refund application with the Bureau: Provided,
That, to determine the effectivity of item no. 1, all applications filed from
January 1, 2018 shall be processed and must be decided within 90 days
from the filing 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.
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.
3.3. What are subject to zero rated sale of services?
The following services performed in the Philippines by VAT-registered persons shall be

subject to zero percent (0%) rate:
(1) Processing, manufacturing or repacking goods for other persons doing business
outside the Philippines which goods are subsequently exported, where the
services are paid for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the Bangko Sentral ng Pilipinas
(BSP);
(2) Services other than those mentioned in the preceding paragraph , rendered to
a person engaged in business conducted outside the Philippines or to a
nonresident person not engaged in business who is outside the Philippines when

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the services are performed, the consideration for which is paid for in acceptable
foreign currency and accounted for in accordance with the rules and regulations
of the Bangko Sentral ng Pilipinas (BSP);
(3) Services rendered to persons or entities whose exemption under special laws or
international agreements to which the Philippines is a signatory effectively
subjects the supply of such services to 0% rate;
(4) Services rendered to persons engaged in international shipping or international
air transport operations, including leases of property for use thereof Provided,
That these services shall be exclusive for international shipping or air transport
operations;
(5) Services performed by subcontractors and/or contractors in processing,
converting, or manufacturing goods for an enterprise whose export sales exceed
s 70% of total annual production;
(6) Transport of passengers and cargo by domestic air or sea vessels from the
Philippines to a foreign country; and
(7) Sale of power or fuel generated through renewable sources of energy such as,
but not limited to, biomass, solar, wind, hydropower, geothermal, ocean
energy, and other emerging energy sources using technologies such as fuel cells
and hydrogen fuels.
(8) Services rendered to:
 Registered enterprises within a separate customs territory as provided
under special law; and
 Registered enterprises within tourism enterprise zones as declared by
the TIEZA subject to the provisions under RA No. 9593 or The Tourism
Act of 2009.
Provided, That subparagraphs (1) and (5) hereof shall be subject to the 12% value-
added tax and no longer be subject to 0% VAT rate upon satisfaction of the following
conditions:
(1) The successful establishment and implementation of an enhanced VAT refund

system that grants refunds of creditable input tax within 90 days from the filing
of the VAT refund application with the Bureau: Provided, That, to determine the
effectivity of item no. 1, all applications filed from January 1, 2018 shall be
processed and must be decided within 90 days from the filing 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.

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Exercises
1. TRUE/FALSE: Zero rated sales is subject to VAT.

2. TRUE/FALSE: The Output tax in Zero Rated sale is Zero.
3. TRUE/FALSE: A transaction subject to zero rated sale is exempt to VAT.
4. TRUE/FALSE: A non- VAT registered person can be subject to zero percent VAT.
5. TRUE/FALSE: The output tax of a person subject to zero percent tax can be claimed
as refund.
End of Topic 3.
References:
Review Materials – Atty. Ferdinand U. Rosada, CPA
Transfer and Business Taxation – Enrico D. Tabag & Earl Jimson R. Garcia.

17
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COLLEGE OF SCIENCE AND TECHNOLOGY

Cagamutan Norte, Leganes, Iloilo - 5003

SUBJECT TITLE: BUSINESS TAXATION

Topic 1 – Overview of Value Added Tax

1. Define business tax

1.1. What is Business Taxes?

1.2. What are the types of transfer?

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1.3. What are the types of business taxes?

A. Value Added Taxes (VAT)

1.4. What is VALUE ADDED TAX?

1.5. Who is liable to pay the VALUE ADDED TAX?

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However, in the case of importation of taxable goods, the importer, whether an

1.6. What is mean by in the course of trade or business?

Non-resident persons who perform services in the Philippines are deemed to be

1.7. What is the nature of VALUE ADDED TAX?

1.8. How to compute the value added tax payable?

The corresponding liability on value added tax, as presented in the previous

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1.9. What are the characteristics of VAT?

 It is an indirect tax where tax shifting is always presumed.

1.10. What are kinds of VAT?

a. Income tax c. Indirect tax

a. Excise tax c. Input tax

a. Income tax c. Percentage tax

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a. Only statement 1 is correct c. Both statements are correct

a. Person engaged in business

7. Which of the following is subject to 12% VAT?

a. Non-life insurance companies c. Life insurance

a. Both statements are correct;

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c. Services rendered in the Philippines by a non-resident foreign person shall be

12. Which of the statements is correct?

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Topic 2 – VAT on Sale of Goods and Properties, Importation and Sale

1. Define Value Added Tax on Sale of Goods or Properties.

2.1. What is the Value-added Tax on Sale of Goods or Properties?

Rate and Base of Tax

12% of the Gross Selling Price

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SALE OF REAL PROPERTIES

2.2. What are the Transactions deemed sale?

The following transactions shall be deemed sale:

1. Transfer, use or consumption not in the course of business of goods or properties

1. Change of control of a corporation by the acquisition of the controlling interest of such

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2.4. What is the Value-added Tax on Importation of Goods?

Rate and Base of Tax

12% of the Total Value

Transfer of Goods by Tax-exempt Persons.

In the case of tax-free importation of goods into the Philippines by persons,

Rate and Base of Tax

12% of Gross Receipts

2. Stock, real estate, commercial, customs and immigration brokers;

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The phrase sale or exchange of services also includes:

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3) The supply of scientific, technical, industrial or commercial knowledge or

5) The supply of services by a nonresident person or his employee in connection with

6) The supply of technical advice, assistance or services rendered in connection with

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