1.

When a business entity is VAT-registered, it is subject to 12% on its gross sales

and gross receipts. Such sales tax is referred to as VAT or Output tax. On the other
hand, when a business entity is Non-VAT, it is subject to 3% on its gross sales and
gross receipts. Such sales tax is referred to as Percentage tax.

VAT is considered indirect tax while Non-VAT is considered direct tax. The former
means that the tax (VAT) can be passed on to the customer while Percentage tax
will solely be shouldered by the business entity and is not allowed to be passed on
to customers.

2.
1. Value added - It is a tax on value added of a taxpayer arising from the sales of
goods, properties or services during the quarter. “Value added” is the difference
between the total sales of the taxpayer for the taxable quarter subject to VAT and
his total purchases for the same period subject also to value added tax (Mamalateo,
2014).
4. Broad-based tax on consumption in the Philippines – It is broad-based
because every sale of goods, properties or services at the levels of manufacturers
or producers and distributors is subject to VAT. However, the tax burden rests on
the final consumers (Mamalateo, 2014).
5. Excise tax based on consumption – It is a tax on the privilege of engaging in
the business of selling goods or services, or the importation of goods.
6. Indirect tax - Tax shifting is always presumed. It may be shifted or passed on
to the buyers, transferee, or lessee of the goods, properties or services as part of
the purchase price.
7. Ad valorem tax - The amount is based on the gross selling price or gross value
in money of the goods or properties sold, bartered or exchangedor on the gross
receipts derived from the sale or exchange of services, including the use or lease of
properties
11. Regressive tax – By its very nature, VAT is regressive tax.

3. For a “zero-rated good,” the government doesn’t tax its sale but allows credits
for the value-added tax paid on inputs. If a good or business is “exempt,” the
government doesn’t tax the sale of the good, but producers cannot claim a credit
for the VAT they pay on inputs to produce it.

ZERO-RATED TRANSACTIONS generally refers to the export sale of good and supply
of services. The output tax rate is set at zero. When applied to the tax base, such
rate obviously results in no tax chargeable against the purchaser. In VAT-exempt
sales, the taxpayer/seller shall not bill any output tax on his sales to his customers.

Governments commonly lower the tax burden on low-income households by zero

rating essential goods, such as food and utilities or prescription drugs.
Governments generally only use exemptions when value added is hard to define,
such as with financial and insurance services.
4. YES. The sale is subject to tax. Sec. 107 (B) of the NIRC provides that “In case
of tax-free importation of goods into the Philippines by persons, entities or agencies
exempt from tax, where the goods are subsequently, sold, transferred or
exchanged in the Philippines to non-exempt persons or entities, the purchasers,
transferees or recipients shall be considered a the importer thereof, who shall be
liable for any internal revenue tax on such importation.

5. NO. Royal Mining’s claim is bereft of merit. It is the sale of gold (and not silver)
to the BSP that is considered as export sale subject to zero-rated VAT.

6. A. Under the Destination Principle, the goods and services are taxed only in
the country where these are consumed, and in connection with the said principle,
the Cross Border Doctrine mandates that NO VAT shall be imposed to form part
of the cost of the goods destined for consumption OUTSIDE the territorial border of
the taxing authority. Thus, exports are zero-rated, while imports are taxed.

B. IMPACT OF TAXATION refers to the statutory liability to pay the tax. It falls on
the person originally assessed with a particular tax. It is the imposition of the tax
(liability). It is on the seller upon whom the tax has been imposed.

INCIDENCE OF TAXATION is the economic cost of tax. It is also known as burden of

taxation. It is the payment of tax (burden). It is on the final consumer, the place at
which the tax comes to rest.

C.

BASIS EFFECTIVELY AUTOMATIC

ZERO-RATED ZERO-RATED
TRANSACTION TRANSACTION
Nature Refers to sales Refers to export
to persons or sales and
entities whose foreign
exemption currency
under special denominated
laws or sales
international
agreements to
which the
Philippines is a
signatory
Need to apply An application No need to file
for zero-rating for zero-rating an application
must be filed form and to
and the BIR secure BIR
approval is approval before
necessary the sale is
before the considered
transaction may zero-rated.
be considered
effectively zero-
rated.
For whose Intended to Primarily
benefit is it benefit the intended to be
intended purchaser who, enjoyed by the
not being seller who is
directly and directly and
legally liable for legally liable for
the payment of the VAT,
the VAT, will making such
ultimately bear seller
the burden of internationally
the tax shifted competitive by
by the allowing the
refund or credit
of input
suppliers. taxes that are
attributable to export
sales.
Stamping of Required. The Not required.
“zero-rated” on buyer, as shown The buyer, as
VAT invoice or by his address shown by his
receipt in the sales address in the
invoice and sales invoice
shipping and shipping
documents, is documents, is
located outside located outside
the Philippines the Philippines.
merely by
fiction of law.
Effect Results in no tax
chargeable against the
purchaser.
The seller can claim a
refund or a tax credit
certificate for the VAT
previously charged by
supplier.
D.

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.

Gross receipts pertains 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
and advanced payments (1)actually or (2)constructively received during the taxable
quarter for the services performed or to be performed for another person, excluding
VAT, except those amounts earmarked for payment to unrelated third (3rd) party
or received as reimbursement for advance payment on behalf of another which do
not redound to the benefit of the payor (service provider).
E.

EXEMPT PARTY EXEMPT

TRANSACTION
A person or entity Involves goods or
granted VAT services which, by
exemption under the their nature are
NIRC, special law or specifically listed in
international and expressly
agreement to which exempted from the
RP is a signatory, and VAT under the NIRC,
by virtue of which its without regard to the
taxable transactions tax status of the
become exempt from parties in the
transactions.
the VAT.
Such party is not Transaction is not
subject to the VAT, but subject to VAT, but the
may be allowed a tax seller is not allowed
refund or credit of any tax refund or
input tax paid, credit for any input
depending on its taxes paid.
registration as a VAT
or non-VAT taxpayer.

F.

Presumptive input 4%
tax credit(Sec. 111[B],
NIRC) – may be calimed
by persons engaged in
the business of
processing ssardines,
mackerel and milk;
manufacturing refined
sugard and cooking oil;
and noodle based
instant meals; all of
which are substantially
produced from primary
agricultural and marine
food producs, the
supply of which is
exempt from VAT
Transitional input tax 2% transitional or 12%
credit(Sec. 111 [A], actual input tax rate
NIRC) – may be claimed
by persons who
become liable to VAT
for the first time and
such represent input
tax on inventories
goodsw, materials and
supplies existing on the
date of commencement
of a person’s status as a
taxable person
Presumptive input tax
It is an input tax credit allowed to persons or firms engaged in the: [SMM-RCN]
1. processing of: a. sardines
b. mackerel
c. milk

2. manufacturing of: a. refined sugar

b. cooking oil
c. packed noodle based instant meals

The allowed input tax shall be 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 (Sec. 111 [B], NIRC).
They are given this 4% presumptive input tax because the goods used in the said enumeration are VAT-exempt (Ingles, 2015).

Transitional input tax

Transitional input tax credit operates to benefit newly VAT-registered persons, whether or not they previously paid taxes
in the acquisition of their beginning inventory of goods, materials, and supplies. During that period of transition from
non-VAT to VAT status, the transitional input tax credit serves to alleviate the impact of the VAT on the taxpayer. At the
very beginning, the VAT-registered taxpayer is obliged to remit a significant portion of the income it derived from its sales
as output VAT.

These can be availed by taxpayers who become VAT registered persons upon:
1. Exceeding the minimum turnover of P1,919,500 in any 12 month period, or
2. Who voluntarily register even if they do not reach the threshold, except for franchise grantees of radio
and TV broadcasting whose threshold is P10,000,000)

The said taxpayers shall be entitled to a transitional input tax on the inventory on hand as of the effectivity of their VAT
registration on the following:
1. Goods purchased for resale in the present condition;
2. Raw materials - Materials purchased for further processing but which have not yet undergone processing;
3. Manufactured goods
4. Goods in process for sale; or
5. Goods and supplies for use in the course of the taxpayer’s trade or business as a VAT-registered person (Sec. 4. 110-
1(a.), R.R 16-2005).

The allowed input tax shall be whichever is higherbetween:

1. 2% of the value of the taxpayer’s beginning inventory of goods, materials and supplies; or

2. The actual value-add tax paid on such goods. (Sec.111[A], NIRC).

7. The following elements must be present in order for a transaction to be subjected to 12% VAT:
1. It must be done in the ordinary course of trade or business;
2. There must be a sale, barter, exchange, lease of properties, or rendering of service in the Philippines; and
3. It is not VAT-exempt or VAT zero-rated (Ingles, 2015).

Unlike a direct tax, such as the income tax, which primarily taxes an individual's ability to pay based on his income or net
wealth, an indirect tax, such as the VAT, is a tax on consumption of goods, services, or certain transactions involving the
same. The VAT, thus, forms a substantial portion of consumer expenditures.

Sale, barter, exchange, lease of goods or properties, or rendering of service in the Philippines
When there is no sale, barter or exchange of goods or properties, then no VAT should be imposed.
Thus, when an affiliate provides funds to a taxpayer who then uses the funds to pay a third party, the transaction is not
subject to VAT, as there was no sale, barter, or exchange between the affiliate and the taxpayer. The money was simply
given as a dole-out (CIR v. Sony Philippines, Inc., G.R. No. 178697, November 17, 2010).
However, if a taxpayer renders service to an affiliate for a fee (even if the fee is merely to reimburse costs), the service is
subject to VAT. Thus, the collection of condominium corporations of association dues and membership fees from its
member condominium-unit owners are subject to VAT even if receives payments for services rendered to its affiliates in
trust and on reimbursement-of-cost basis only, without realizing profit (CIR v. CA and COMASERCO, G.R. No. 125355, March
30, 2000). Also, the fees collected by toll operators are subject to VAT as they are engaged in rendering service of
constructing, maintaining and operating expressways (Diaz v. Secretary of Finance, G.R. No. 193007, July 19, 2011).
NOTE: If the transaction is outside the Philippines, then it is not subject to VAT.

8.

NO. The threshold for every type of good or property differs. A VAT-registered person, regardless whether his gross
sales or gross receipts exceeds P1,919,500 or not, shall be liable for VAT. Once VAT-registered, he shall be liable for VAT
on sale of goods or services, regardless of the amount. If a person is VAT-registered, his gross sales or gross receipt shall
always be subject to VAT whether or not it exceeds the P1,919,500 threshold, unless he cancels his registration.. But in
order for the sale of real properties held primarily for sale to customers or held for lease in the ordinary course of trade
or business of the seller to be subject to 12% VAT, threshold is: for sale of residential lot, gross selling price exceeding
P1,919,500, and residential house and lot or other residential dwellings, with gross selling price exceeding
P3,199,200, where the instrument of sale (whether the instrument is nominated as a deed of absolute sale, deed of
conditional sale or otherwise) is executed on or after July 1, 2012 (R.R. 16-2005, as amended by RR 16-2011 and RR 03-
2012).

This however, does not include the sale of parking lot which may or may not be included in the sale of condominium
units. The sale of parking lots in a condominium is a separate and distinct transaction and is not covered by the rules on
threshold amount not being a residential lot, house & lot or a residential dwelling, thus, should be subject to VAT
regardless of amount of selling price (RR 13-12).
NOTE: It is only the sale of real properties primarily held for sale to customers or held for lease in the ordinary course of
trade or business of the seller which shall be subject to VAT. As such, transactions involving real properties held as capital asset
of individuals are not subject to VAT. However, it may give rise to capital gains tax liability. Only persons engaged in real estate
business either as a real estate dealer, developer or lessors, are subject to VAT.