VALUE ADDED TAX

(VAT) ON SALE OF
PROPERTIES
 A sale of real property by a real estate dealer
will be subject to the value-added tax at 12%
of the gross selling price.
Who is a real estate agent?

A real estate dealer is any person engaged in the

business of buying, developing, selling, or
exchanging real property as principal and holding
himself out as a full or part-time dealer of real
estate.
What is gross selling price?

It is whichever is higher between the

consideration as stated in the contract of sale and
the fair market value.
What is fair market value?

It is whichever is higher between the fair market

value as determined by the Commissioner of
Internal Revenue (zonal value) and the fair
market value as shown in the schedule of values
of the Provincial or City Assessor.
Example:
Consideration stated in the Deed of Sale 3,000,000
Zonal Value 3,500,000
Fair Market Value in the local assessor office 2,000,000
Gross Selling Price 3,500,000
VAT 420,000
 Installment sale by the real estate dealer

Installment payments of the value added tax is

allowed if the initial payments do not exceed
25% of selling price in the deed of sale.
 Installment value added tax of a real estate
dealer
Step 1. Compute the Vat on the tax base
(whichever is higher of the three values)

Step 2. Determine the Vat on installment

payment as follows:

Collection on the selling price X Computed

Agreed selling price Vat in Step 1
Consideration in the deed of sale 1,800,000
Zonal Value 2,000,000
Fair Market Value in LGU 1,700,000

Installment Payments:
July 1, 2022 225,000
December 1, 2022 225,000
July 8, 2023 1,350,000
Step 1
2,000,000 x 12% 240,000

Installment Vat
July 1, 2022:
225,000/1,800,000 X 240,000 30,000
December 1, 2022:
225,000/1,800,000 X 240,000 30,000
July 1, 2023:
1,350,000/1,800,000 X 240,000 180,000
Consideration in the deed of sale 4,000,000
Zonal Value 2,000,000
Fair Market Value in LGU 5,000,000

Installment Payments:
May 1, 2021 1,000,000
May 1, 2022 3,000,000

Expenses paid to Vat taxpayers

May 2021 20,000
May 2022 60,000
TRANSITIONAL
INPUT TAX
SEC. 111. Transitional/Presumptive Input Tax Credits. –
(A) Transitional Input Tax Credits. - A person who becomes liable to value-
added tax or any person who elects to be a VAT-registered person shall, subject
to the filing of an inventory according to rules and regulations prescribed by the
Secretary of finance, upon recommendation of the Commissioner, be allowed
input tax on his beginning inventory of goods, materials and supplies equivalent
to two percent (2%) of the value of such inventory or the actual value-added tax
paid on such goods, materials and supplies, whichever is higher, which shall be
creditable against the output tax.
PRESUMPTIVE
INPUT TAX
SEC 111 (B) Presumptive Input Tax Credits. - Persons or firms engaged in the
processing of sardines, mackerel and milk, and in manufacturing refined sugar
and cooking oil, shall be allowed a presumptive input tax, creditable against the
output tax, equivalent to four percent (4%) of the gross value in money of their
purchases of primary agricultural products which are used as inputs to their
production.
As used in this Subsection, the term 'processing' shall mean pasteurization,
canning and activities which through physical or chemical process alter the
exterior texture or form or inner substance of a product in such manner as to
prepare it for special use to which it could not have been put in its original form
or condition.
Fish (from fishermen) 100,000
Tin cans 20,000
Tomato paste (in cans) 5,000
Olive oil (in plastic bottles) 2,500
Peppers (from farmers) 1,800
Paper labels (from printers) 500
Sales 400,000
VALUE ADDED TAX
ON SALE OF
SERVICES
Sale or Exchange of Service

Means the performance of all kinds of services in

the Philippines for others for a fee, remuneration
or consideration (but there must be no employer-
employee relationship)
Service is subject to Vat of:
a. Service is in the course of trade or business
b. Service is rendered in the Philippines
c. Service is not subject to any of the percentage
taxes
“similar services regardless of whether or not
the performance thereof calls for the exercise
or use of the physical or mental faculties.”
 TAX BASE

The tax base (or the amount on which the rate

of valid added tax is applied) is GROSS
RECEIPTS.
 GROSS SELLING PRICE

a. Payments on the contract price,

compensation, service fee, rental or royalty
b. Payments for materials supplied with the
services
c. Deposits or advanced payments on the
contract for services
 TAX RATES

a. 12% of the gross receipts

b. 0% of the gross receipts from services
performed to certain entities under certain
conditions
 TAX FORMULA

Output taxes (seller’s value added tax on sales)

Less: Input taxes (seller’s value added tax on puchases)
Value added tax payable by the seller
Harold, a building contractor, constructed a commercial
building for Ivan. Harold secured the services of Jake.
Ivan paid 10,000,000 to Harold while Harold paid Jake,
a subcontractor 2,000,000.

How much is the vat payable of Harold?