VAT: CONCEPT

AND NATURE
OF VAT
I N P U T TA X C A R RY O V E R
VAT A N D D I S C O U N T F O R S E N I O R
CITIZEN AND PWD

Presentation by:
NIKKI JOY M. FRANCISQUETE
 Evaluate VAT including
the application of rules on
excess input tax carry-
over.
OBJECTIVES :
Understand the concept
and nature of VAT and
discounts for senior
citizens and persons with
disability (PWD).
Formula:
Output Tax
Less: Allowable Input Tax
Net VAT Payable
Less: Tax credits/Payments
VAT Payable (Excess)

VAT
 Tax credits/Payments: PAYABLE
1. VAT paid in previous month
2. VAT paid in return previously filed, in the case of amended return
3. Advance payment made to the BIR
4. Final withholding VAT on sales to the government
5. Advance VAT on certain goods
 TAX CREDIT/PAYMENTS

Advance VAT on certain goods

The owner’s or sellers of the following goods are required to pay advanced VAT before their
withdrawal at the point of production:
 Refined Sugar – Total production of 50 kg-bag of refined sugar x 1,400
 Flour
 Importation of wheat by a flour miller
(Invoice price + estimated customs duties and other charger prior to the release of wheat from
customs, except advance VAT) x 105% x 75%

 Purchase of wheat by flour millers from traders

(Invoice value + estimated freight) x 105% x 75%
 TAX CREDIT/PAYMENTS

Advance VAT on certain goods

 Naturally grown and planted timber products

Luzon Visayas Mindanao

Philipine mahogany group, Manggasinoro 1,400/m³ 1,400/m³ 1,425/m³
group, Manggachapul group, Narig
group,
Palosapis group, Guijo group
Yakal group 1,500/m³ 1,530/m³
Apitong group 1,260/m³ 1,260/m³ 1,260/m³
Softwood species except Igem 715/m³ 715/m³ 715/m³
Igem 1,275/m³ 1,275/m³ 1,275/m³
Nato 1000/m³ 1000/m³ 1000/m³
 TAX CREDIT/PAYMENTS

Advance VAT on certain goods

 Naturally grown and planted timber products

Luzon Visayas Mindanao

Furniture/Construction hardwood 950/m³ 950/m³ 950/m³
Premium species, allowed cut 3,000/m³ 3,000/m³ 3,000/m³
Lesser-used 700/m³ 700/m³ 700/m³
Pulpwood, chip wood and mathwood 95/m³ 95/m³ 95/m³
species
 TAX CREDIT/PAYMENTS

Exempt from Advance VAT Payment

 Withdrawal of raw cane sugar

 Withdrawal of sugar by duly accredited and registered agricultural cooperative of good

standing

 Withdrawal of sugar by duly accredited cooperative which is sold to another agricultural

cooperative
 VAT PAYABLE

ABC Company had the following data during the quarter:

Sales, net of VAT Input VAT

Private entities 1,350,000 60,000
Export/Import 300,000 36,000
Government 250,000 24,000
Exempt goods 100,000 2,000

ABC Company had 12,000 input VAT-carry-over from the preceeding quarter. It paid a total of 28,000
VAT in the first two months of the quarter/ It also made voluntary advance payments of 20,000 to the
BIR in anticipation of its quarterly VAT payable
 VAT PAYABLE

ABC Company had the following data during the quarter:

Output tax:
Sales to private entity 162,000
Export sales 0
Sales to government 30,000 192,000
Less: Allowable input tax
Input VAT carry-over 12,000
Private entities 60,000
Import 36,000
Standard input VAT 17,500 125,500
Net VAT payable 66,500
Less: Tax credit/payments
VAT paid in previous months 28,000
Advance payments to BIR 20,000
Final Withholding VAT 12,500 66,500
Vat payable 6,000
Schedule of payment of VAT payable:
• 1st month of the quarter – within 20 days from the end of
the month

INPUT
• 2nd month of the quarter – within 20 days from the end of
the month
• 3rd month of the quarter – within 25 days from the end of
the quarter TAX
• Withholding VAT Return – within 10 days after the end of
the month
CARRY-
OVER
Overpayment
• Negative net amount in the VAT return may be treated as
“Input VAT Carry-over” to the succeeding period
• Taxpayer does not need to pay VAT but only required to
file the VAT Return
 INPUT TAX CARRY-OVER

Treatment of excess input tax:

Type of Input Tax Treatment

Related to sales subject to 12% VAT Carry-over

Subject to 0% VAT Carry-Over

Capital goods
In case of cancellation of VAT registration
Refund
Convert into tax credit certificate
Refund
Convert into tax credit certificate
Convert into tax credit certificate
Refund, in case it has no other tax liability
 INPUT TAX CARRY-OVER

• Carry-over means excess input tax can still be used against the output tax only after
the succeeding taxable month until there is no more excess input tax or the
computation will result to VAT payable

• Refund means cash refund by the BIR to the taxpayer. Once, chosen, there will be
no more option to carry-over or convert to tax credit certificate

• Tax credit certificate can be used not just against output tax but also to other
internal revenue taxes.
INPUT TAX CARRY-OVER

Prescription for claim for refund or tax credit

• Two years from the close of the taxable

quarter when the zero-rated sales were
made, not from the date of payment
 INPUT TAX CARRY-OVER

Sample Problem:

The following data relates to the regular sales of the VAT taxpayers:

Output VAT Input VAT

Prior quarter 350,000 390,000
Current quarter:
1st month of current quarter 120,000 100,000
2nd month of the current quarter 150,000 145,000
3rd month of the current quarter 220,000 70,000
 INPUT TAX CARRY-OVER

Solution:

Excess from the prior quarter (350,000-390,000) 40,000

1st month of the quarter 2nd month of the quarter 3rd month of the quarter
Output VAT 120,000 150,000 490,000
Less: Allowable input tax 100,000 145,000 315,000
Net VAT payable 20,000 5,000 175,000
Less: Tax (40,000) (20,000) (40,000)
credits/payments
VAT Payable/(excess) (20,000) (15,000) 135,000
 Total bill inclusive of VAT
Formula in computing tax due: xxx
Less: VAT
xxx
VAT-
Total bill exclusive of VAT xxx
Less: 20% discount xxx EXEMPT
AND
In case that: Total amount
Total bill due of VAT
inclusive xxx
• The bill is for a group of xxx
individuals involving non- Divided by [No. of customer] xxx
senior citizens and a senior
citizen
Bill per customer
Multiply by [No. of SC]
xxx
xxx
DISCOUNT
• In case of set meal(s) not
limited to a single serving
and is shared with Non-
Bill for senior citizen
Less: VAT
xxx
FOR
SENIOR
xxx
Senior Citizens. Total bill exclusive of VAT xxx
• For group of diners Less: 20% discount xxx
composed of Senior Citizens
who ordered for group meals
Total amount due xxx
CITIZEN
AND PWD
or food items for sharing in
restaurants and not all the
Senior Citizen’s ID cards
(including purchase of whole
cake and pizza).
VAT-EXEMPT SALES AND DISCOUNT TO SENIOR CITIZEN
(SEC. 4, RR 7-2010)

The following items sold to a senior citizen are vat-exempt and will entitle the latter to a minimum
discount of 20%:
• Medicine and drug purchases including influenza and pneumococcal vaccines and such other
essential medical supplies, accessories and equipment.
• Professional fees of attending physicians in all private hospitals, medical facilities, outpatient
clinics and home health care services.
• Professional fees of licensed health workers providing home health care services in all private
hospitals, medical facilities, outpatient clinics, and home health care services.
• Medical and dental service, diagnostic and laboratory fees.
• On actual fare for land transportation travel.
• In actual fare for domestic air transport and sea shipping vessels and the like.
• On the utilization of services in hotels and similar lodging establishments, restaurants,
recreation centers.
• On admission fees charged by theaters, cinema houses and concert halls, circuses, carnivals and
other similar places of culture, leisure and amusement.
• On funeral and burial services of senior citizens.
VAT-EXEMPT SALES AND DISCOUNT TO SENIOR CITIZEN
(SEC. 4, RR 7-2010)

Rule for Restaurants:

• Discount shall be for the sale of food, drinks, dessert, and other consumable items
including value meals and promotional meals offered for the consumption of general public
• 20% discount and VAT exemption shall apply for the following:
• Dine-in, take-out, drive-thru, and delivery orders (excluding bulk orders)
• Set meals, Group meals, or group walk-in, including the purchase of whole cake and
pizza
• “Pasalubong” food items which are single-serving/solo meal for the personal and exclusive
consumption of Senior Citizen.
 VAT-EXEMPT AND DISCOUNT ON SENIOR CITIZEN

Sample Problem:

Nanay Caridad, a senior citizen went to JAJAZ PABS Restaurant with her 5 grandchildren. The
gross amount of their order is 4,032 inclusive of VAT. How much is the discount and total amount
due with respect to the proportion of senior citizen in the gross amount.

Total bill inclusive of VAT 4,032

Divided by [No. of customer] 6
Bill per customer 672
Multiply by [No. of SC] 1
Bill for senior citizen 672
Less: VAT 72
Total bill exclusive of VAT 600
Less: 20% discount 120
Total amount due 480
 VAT-EXEMPT AND DISCOUNT ON SENIOR CITIZEN

Sample Problem:

Nanay Caridad, and Lolo Enting, both senior citizens went to JAJAZ PABS Restaurant with their 5
grandchildren. The gross amount of their order is 4,032 inclusive of VAT. How much is the
discount and total amount due with respect to the proportion of senior citizen in the gross amount.

Total bill inclusive of VAT 4,032

Divided by [No. of customer] 7
Bill per customer 576
Multiply by [No. of SC] 2
Bill for senior citizens 1,152
Less: VAT 123
Total bill exclusive of VAT 1,029
Less: 20% discount 206
Total amount due 823
 Purchase of basic necessities and prime
commodities are not exempt from VAT.
GRANT OF 5%
 For SC, they are given 5% discount on these SPECIAL
commodities. DISCOUNT
 Granted considering that the said purchase is for
personal and exclusive consumption of senior
(SECTION 5,
citizen RR 7-2010 AS
 Total purchase amount should not exceed 1,300 AMENDED BY
per week without carry-over of unused amount
 A purchase booklet issued by OSCA shall be RR 8-2010 AND
presented to the retailer upon purchase of basic RMC 38-2012).
necessities and prime commodities
 GRANT OF 5% SPECIAL DISCOUNT (SECTION 5, RR 7-2010
AS AMENDED BY RR 8-2010 AND RMC 38-2012).

Note:
• The input tax attributable to the exempt sale shall not be allowed as an input tax credit and must be closed to cost or expense
account by the seller
• While the law provides for VAT exemption of Senior Citizens, it does not include exemption from the payment of Percentage Tax.
• In the purchase of goods and services with promotional discount
• Promotional discount or the 20%/5% discount, whichever is higher.
• Discount that must be given to the Senior Citizen shall in no case be less than 20%/5%.
• The sale of goods and services on promotional discount is still exempt from VAT (except sale of basic necessities and prime
commodities).
• Meals primarily prepared and intentionally marketed for children and not for Senior Citizen’s personal consumption are not entitled
to 20% discount. (Rule IV, Article 7,)
• Alcoholic beverages:
• Not subject to the 20% discount and VAT exemption if purchased “in bulk”, “in buckets” or “in cases”.
• Entitled to the 20% discount and VAT-exemption if consumed as a single serving drink.
• Beverages purchased in a bar, club or cabaret are exempt from VAT but subject to amusement tax of 18% A Senior Citizen
may still avail of the 20% discount on the purchase of an alcoholic drink but the discount shall be limited only to a single
serving of an alcoholic beverage.
• Cigarettes/ cigars are not the food or essential items deemed subject to the 20% discount.
• Toll fees are not the same as “fares”. Hence, it is not subject to the 20% Senior Citizen Discount. RA 10754 “AN A
Person with disability shall be entitled to:

1. Atleast 20% and VAT exemption of the following, for exclusive use,
RA 10754 “AN
enjoyment, and availment of: ACT
a) On the fees and charges relative to the utilization of all services
in hotels and similar lodging establishments; restaurants and
EXPANDING
recreation centers THE BENEFITS
b) On admission fees charged by theaters, cinema houses, concert
halls, circuses, carnivals and other similar places of culture,
AND
leisure and amusement PRIVILEGES
c) On the purchase of medicines in all drugstores
OF PERSONS
d) On medical and dental services including diagnostic and
laboratory fees such as, but not limited to, x-rays, computerized WITH
tomography scans and blood tests, and professional fees of
attending doctors in all government facilities, subject to the DISABILTIY
guidelines to be issued by the Department of Health (DOH), in
coordination with the Philippine Health Insurance Corporation
(PWD)”
(PhilHealth)
RA 10754 “AN ACT EXPANDING THE BENEFITS AND
PRIVILEGES OF PERSONS WITH DISABILTIY (PWD)”

e) On medical and dental services including diagnostic and laboratory fees, and professional fees
of attending doctors in all private hospitals and medical facilities, in accordance with the rules
and regulations to be issued by the DOH, in coordination with the PhilHealth;
f) On fare for domestic air and sea travel
g) On actual fare for land transportation travel such as, but not limited to, public utility buses or
jeepneys (PUBs/ PUJs), taxis, Asian utility vehicles, (AUVs), shuttle services and public
railways, including Light Rail Transit (LRT), Metro Rail Transit (MRT) and Philippine
National Railways (PNR), and
h) On funeral and burial services for the death of the PWD: Provided, that the beneficiary or any
person who shall shoulder the funeral and burial expenses of the deceased PWD shall claim
the discount under this rule for the deceased PWD upon presentation of the death certificate.
Such expenses shall cover the purchase of casket or urn, embalming, hospital morgue,
transport of the body to intended burial site in the place of origin, but shall exclude obituary
publication and the cost of the memorial lot
 RA 10754 “AN ACT EXPANDING THE BENEFITS AND
PRIVILEGES OF PERSONS WITH DISABILTIY (PWD)”

2. Educational assistance to PWD including support for books, learning materials, and uniform
allowance to the extent feasible
3. The continuance of the same benefits and privileges given by the Government Service Insurance
System (GSIS), Social Security System (SSS), and Pag-ibig, as the case may be, as are enjoyed
by those in actual service;
3. Special programs for PWD on purchase of basic commodities, subject to the guidelines to be
issued for the purpose by the Department of Trade and Industry (DTI) and the Department of
Agriculture (DA);
4. Provision of express lanes for. In the absence thereof, priority shall be given to them.
 RA 10754 “AN ACT EXPANDING THE BENEFITS AND
PRIVILEGES OF PERSONS WITH DISABILTIY (PWD)”

“The mentioned privileges are available only to PWD who are Filipino Citizens upon submission of
any of the following as proof of his/ her entitlement thereto:
1. An identification card issued by the city or municipal mayor or the barangay captain of the place
where the PWD resides;
2. The passport of the PWD concerned
3. transportation discount fare identification card (ID) issued by the National Council for the
Welfare of Disabled Persons (NCWDP).

Note:
The privileges may not be claimed if the PWD claims a higher discount as may be granted by the
commercial establishment and/ or under other existing laws or in combination with other discount
program/s.
 RA 10754 “AN ACT EXPANDING THE BENEFITS AND
PRIVILEGES OF PERSONS WITH DISABILTIY (PWD)”

The establishments may claim the discounts granted as tax deductions based on the net cost of the
goods sold or services rendered:

Provided, however, that the cost of the discount shall be allowed as deduction from the gross income
for the same taxable year that the discount is granted

Provided, further, that the total amount of the claimed tax deduction net of value-added tax, if
applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to
proper documentation and to the provisions of the National Internal Revenue Code (NIRC), as
amended.
 Tax deduction based on the net cost of the goods
sold or services rendered

 The cost of the discount shall be allowed as

deduction from the gross income for the same TREATMENT
taxable year that the discount is granted OF THE
 Total amount of the claimed tax deduction net of DISCOUNT BY
value-added tax, if applicable, shall be included in
their gross sales receipts for tax purposes and shall THE
be subject to proper documentation and to the
provisions of the National Internal Revenue Code
TAXPAYER
(NIRC), as amended.
THANK YOU