EROSAS

1hx TER LA
The Review School of Accountancy ETTel. No. 735-9807 & 734-3989
vettiar
2000

TAXATION
TAMAYO/GARCIA

1.
TX - 301: VAT-Subject Transactions VAT-Subject Transactions
Transactions a, Sale of goods or properties in the course of trade or business
b. Sale of services and lease of properties in the course of trade or business LC. Importation
Tax Base Gross selling price
Gross receipts Total landed cost
9
"In the Course of Trade or Business" Defined
The phrase "in the course of trade or business" means the regular conduct or pursus economic activity including
transactions incidental thereto, by any person regardless of the
5 means the regular conduct' or pursuit of a commercial or an
thereto, by any person regardlless of whether or not the person
engaged therein is a non-stock, non-profit private organization (irrespective of the display whether or not it sells
exclusively to members or their quests), or government entity.
organization (irrespective of the disposition of its net income and
The rule of regularity, to the contrary-notwithstandino, Services as defined in the Jax-Code renacICULIER
non-resident foreign persons shall be considered as being rendered in-thecourse.of trade-of-busines2
a.
3. Goods or properties

The term "goods or properties" refers to all tangible and intangible objects which are capable of
pecuniany estimation and shall include, among others:
Real properties held primarily for sale to customers er 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;
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 ceble television time.
C.

Sale or exchange of services

Sale or exchange of services means the perfornarice of all kinds of services in the
Philippines for others for a fee, remuneration or consideration, nwhether in kind or in
cash, including those performed är rendered by:
a. Construction and service contractorsConra otrs Tax b. Stock, real estate, commercial, customs and immigration
brokers; Broky's Jak C. Lessors of property, whether personal or real; feesvrstax d. Persons engaged in warehousing
services; e. Lessors or distributors of cinematographic films; f. Persons engaged in milling, processing, manufacturing
or repacking goods for others; mullers far g. Proprietors, operators or keepers of hotels, motels, resthouses, pension
houses, inns, resorts, theatres and movie
houses; h. Proprietors, operators of restaurants, refreshment parlors, cafes and other eating places, including clubs
and
caterers; ctycars fa X i. Dealers in securities; j. Lending investors; k Transportation contractors on their transport
of goods-Orar cargoes including persons who transport goods or
Carages for hire and other domestici:Common. Carriers-by landfeiative to their transport of goods or
cargoes: Common Carrier|
Common.carriers-by-air-and-sea relative to their transport-of passengers, goods or.-Cargoes from one
place in the Tax
Philippines to another place in the Philippines; Cxenyim. Sales of electricity by generation, transmission,
and/or distribution companies; 2lFranchise grantees of electric utilities, telephone and telegraph, radio, and/or
television broadcasting and all other
franchise arantees, except franchise grantees of radio and/or television broadcasting whose annual gro55 receipts
inf the preceding year.do, no exceed P10,000,000, and franchise:grantees of gas and water.utilities o. Non-life
insurance companies (except their crop insurance), including surety, fidelity, indemnity and bonding
companies; n. Similar services regardless of whether or not the performance thereof calls for the exercise or use of
the physical

or mental faculties. (ex. Basketball players)- Physical facultes

(ex. CPA, Teorg - Menfod Fathulpes)
Computation of VAT Payable (Excess Input Tax)
a. Output tax exceeds input tax at the end of any taxable
Output tax quarter
Less: Input tax
VAT payable b. Inut tax inclusive of
input tax carried over from the
Output tax SVIEWS quarter exceeds output
tax
Less: Input tax kforenicol-Jonathay - ExcaSs inget lax Citnud seet
RESA: The Review School of Accountancy

Page 2 of 5
si % 323
valir
Computation of the Tax Base and the Applicable Tax Rates
Transaction a. Sale of goods
Tax Base
Tax Rate Gross selling price mpHES
ACCRUAL PAELS
12% or 0% Gross sates Less: Sales returns
and allowances
Sales discount
0X Net sales, Add: Excise tax, if any (6)
Tax base (excluding VAT) b. Sale of real properties
Installment received on installment plan
| 12% or 0% Add: Interest (initial payments do
not
Penalties for late payment exceed 25% of the gross
XXX. XXX Tax base selling price)
XXX C. Sale of real
properties Selling price stated in the sales documents or fair market value, 1 12% or
on cash basis or whichever is higher deferred payment plan
ona (HCIERABssad (initial
payments exceed
Valut 25% of the gross selling
price). | d. Sale of services
Gross receipts computed as follows:
| 12% or 0% Cash received (actually and
constructively)
XXX "Advance payments for future projects
- XOXOX Materials charged with the services
Gross receipts (excluding VAT)
0XX Ympucs CASH
BASIS Note: Receivables, although earned, are not included. e. Grosseeipes for Gross receipts computed as
follows:

12% or 0%,
dealer in securities
Gross selling price Less: Acquisition cost of securities sold for the month or quarter.. Balance Add: Other or
incidental income Gross receipts (excluding VAT)
 XXX |f.
Goracaiptarehe
Gross receipts shall refer to the following:
12% or 0% sale
of electricity by
a rotat amounts charged by generation companies for the sale of - generation, ..
* ITIN ty and related and lary services; transmission and
b. Total amount charged by transmission companies for transmission of distribution
electricity and related ancillary services; companies
c. Totalamount charged by distribution companies and electric
Cooperatives for distribution and supply of electricity and related electric service. The universal charge passed on
and collected by distribution companies and electric Cooperatives shall be excluded from the

cómputation of the Gross Receipts. e. Importation

a. In general (Ad Valorem
12% Total value:
XXX Add: Customs duties
XX Excise tax Other charges prior to release of goods from
Customs custody

XXX XXX Tax base

XXX b. In case where customs duties is based
on volume or quantity (Speofio Cueto Duhaus

Total landed cost

X00 Add: Excise tax
XXX Tax base

7. Output VAT
a. Meaning of output tax
xasEAR
| Output tax means the value-added tax on 'sale or lease of taxable goods or
properties or services by any person registered.or, ngired Dregiste In a sale of goods or properties, the
output tax is computed by multiplying the gross | selling price by the regular rate of VAT.
b. Determination of output
tax
ion of output properties or services the value-added to

Sources of Output Taxes

Sale of goods or properties | a. Actual regular sales | b. Actual zero-rated
sales (c. Deemed sales
 Sale of services and lease of properties | a. Actual regular sales |b. Actual zero-rated sales
----
SAMARALIENESTA
... Mai mu-4. -
Zero-Rated Sales defined A zero-rated sale of goods or properties and services (by a VAT-registered person)
is a taxable transaction for VA purposes, but shall not result in any output lax. However, the input tax on
purchases of goods, properties or services, | related to such zero-rated sale, heat Carradineradabantis
Reguliariais.
KeSA: The Review School of Accountancy
10. Examples of Zero-Rated Sales
terMaPirer Wu-temurun.**
uhkan padder 1) The male
Sale of goods or properties |a. Export sates of goods
_Sale of services and lease of
properties bport olis budi: 1) The male and actual diputat afge from the
| 1) Processing, manufacturing or repacking of goods for
imppines to foreign countirrespective of any!
other peacon doing tusiness outsade the Philippa
which goods are subsequently exported;
captabk fornien
Shipping arrangement that may be agreed upon! 2) Services other than processing,
manufactury M CiucACS Acad.
which may influence or determine the transfer ofi

repacking rendered to a person

engaged in bre PIA PSP wles 41' ownership of the goods so exported;
Conducted outside the PhilipOnes or to a non TL 2)
Sote af raw matemianachine datera
esitet person not engaged un business to soutede
powesident Buys for delivery to a fesident local
the Philippines when the services are performed; export
oriented enterprise to be used in
3) Services rendered to persons or entities whose manufacturing,
processing, packing or repacking
exemption under special laws or unternational in the
Philippines of the said buyer's goods;
aareements to which the Philippines Saionato 3) Sale of
raw materials or packaging matemat
effectively subjects the supply of such services to zero
OMDOE-anented enterprise whose export sales
percent rate: Niceed 70% of the total annual production;
4) Services rendered to persons engaged in international 4)
Sale of gold to Bangko Sentral ng Pilipinas,
shu Mngor ar transport operation, including lease ofe 5)
Those considered export sales under the w
property to use thereof; VANWEGO (E. O. No. 226), and / 5)
Services Derformed by subcontractors and/or Contractors other special laws.
In processing, converting, or manufacturing goods for an 6)
The sale of goods, Suppliesqumpment and ful!
enterprise- uose upot sales McCood 70 of the tota | to
personengaged mentonational stripping
annut proxUCTION. International repartouens (new per RA
6) Transport of passengers and cowe bydrMstic ar or 9337).
Sea cartiers from the Philippewies to a foreign Couriery. 7) Sale of power or fucl generated through
renewable
Sources of energy. Provided, however, that zero-rating shall not extend to the sale of services related eo the.
mar atanan.nperation of plants goverating said

Por. |b. Foreign currency denominated sales

Effectively zero-rated sales Lc. Effectively zero-rated
sales

11. Considered Export Sales Under Omnibus Investment Code

a.

"Considered export sales under Executive Order No. 226" shall mean:
the Philippine port F.O.B value determined from invoces, bills of lading, inward letters of gedit, landing
certificates, and other commercial documents, of export products exported directly by a
registered export producer, or b.
the net selling price of export products sold by a registered export producer to another export
producer, or to an export trader that subsequently exports the same;
Sales of export products to another producer or to an export trader shall only be deemed export sales
when actually exported by the latter, as evidenced by landing certificates or similar commercial
documents,
Pursuant to EO 226 and other special laws, aventureittout antal merhatime, the following shall be considered
constructively exported:
a. sales to bonded manufacturing warehouses of export-oriented manufacturers: b. sales to export
processing zones pursuant to Republic Act (RA) Abs. 7916, as amended, 7903.
7922 and other similar export processing zones; C. sale to enterprises duly registered and accredited with the
Subic Bay Metropolitan
Authority pursuant to RA 7227; d. sales to registered export traders operating bonded trading warehouses
supplying raw materials in the
manufacture of export products under guidelines to be set by the Board in consultation with the Bureau of Internal
Revenue (BIR) and the Bureau of Customs (BOC); e sales to diplomatic missions and other agences and/or
instrumentalities granted tax immunities
of locally manufactured, assembled or repacked products whether paid for in foreign curency or not.
12. Foreign Currency Denominated Sales defined
"Foreign Currency Denominated Sale" means the sale to a non-resident of goods, except those mentioned in Secs.
149 (Automobiles) and 150 (Non Essential Goods) of the Tax Code, assembled or manufactured in the Philippines
fox delivery to a resident in the Philippines, paid for in acceptable foreign currency and accounted for in accordance
with the rules and regulations of the BSP.
Sales of locally manufactured or assembled goods for household and personat me te Filipinas atrasand othar. Mot
residents of Uhe Philippines as well as returning Overseas Filipinos under the Intermal Export Program of the
government
paid for M-COMOvertible foreign curpegg and accounted for in accordance with the rules and regulations
of the BSP shall | also be considered export tales
-- Aw minn
RASA: The Review School of Accountancy

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13. Effectively Zero-Rated Sales defined
| Sales of goods or property or services to personS:or-entities who.are-tax-exempt under international.agrectcnts to
which the Philippines is signatory, such as, Asian Development:Bank. (ADB). International Rice Research Institute
(IRRI), etc., shall be effectively subject to VAT at zero-rater.

14. Deemed Sales Transactions

Fiv.

F1) Transfer, use or consumption not in the course of trade or business of acords
HI me course of trade or business of goods and properties originally intended 10
sale or use in the course of trade or business; 2) Distribution or transfer to shareholders or investors as sbare in the
profits.of VAT-registered person; 3) Distribution or transfer to creditors in payment of debt or obligation;
4Consignment of goods if not sold within 60 days following the date of consignment; 5) Retirement from or cessation
of business with respect to all goods on hand, whether capital goods, stock-In-trades
Supplies or materials as of the date of such retirement or Cessation, whether or not the business is continued by die
new owner or successor. Notes: a) In cases 1) to 4), the tax base is the market value.
b) In case 5), the tax base is the lower betwee acquisition cost or market value. 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)
15. Sale, Transfer, or Exchange of Imported Goods by lax-Exempt Persons
a. In the case of goods..imported into the Pilippines-by. VAT-exempt persons? entities, or agencies which are

subsequently sold, transferred or-exchanged in the Philippines to non-exempt persons

or-entities) the latter shall-be
considered the importers thereof who shall be liable for VAT on such importation. b. The tax due on such
importation shall constitute a lien on the goods, Superior to all charges or liens, irrespective of

the possessor of said goods.

16. Summary of the Differences between Sale of Goods or Properties and Sale
of Services or Lease of
Properties
a. Tax base b. Sources of output
Sale of Goods or Properties Gross selling price (accrual basis) a. Actual regular sales b. Actual
zero-rated sales C. Deemed sales
Sale of Services or Lease of Properties Gross receipts (cash basis) a. Actual regular sales b.
Actual zero-rated sales
tax

17. Exercises
6. The following information taken from the books of a VAT-registered enterprise was provided to you:
Domestic sales of goods 12 %
P3,000,000
Sales of packaging materials to an export oriented enterprise whose export sales * exceed 70% of the total annual
production X orixbi 29
2,000,000**
* Local sales of goods to Asian Development Bank (ADB) C rat a’
500,000
Consignment of goods (not returned within 60 days following the date of consignment)/decuul selke)
200,000 v
Goods transferred for the personal use of the.owner (cost is P90,000) market valuel...100 000 M How much was the:
a. total taxable sales? SODODD

b. the output tax using 12% VAT rate? Gore= 391,000

*:
gorsk
|b. (Phil. CPA Modified) A VAT-registered trader made the following sales of goods during the second calendar anar

2013 (net of VAT): *

P200,000
X127 Cash sales
100,000
YX12% Open account sales
100,000
Y'x12% Installment sales (receipts, P40,000) Consignment sales (not yet sold as of end of the quarter):
100,000
June 15

100,000
May 15
100,000
April 15
April 15 (decekd olt) How much is the output tax for the quarter usinj 12% rate?Gono- (soce co xj2)
E.
RESA: The Review School of Accountancy

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HKHWAY
Servic

P500,000 300,000
c. A VAT-registered contrastor has the following selected VAT exclusive data for the month of July 2013:
Collections from contracts completed in 2012 Advances from contracts to be completed in 2014
Corethructively carved Collections froIn
contracts completed in July 2013, net of 10
retention on boas transferred by the payor to the
account of the contractor Materials charged with the services rendered, July, 2013 Payments for services rendered
by a sub-contractor, July, 2013 How much is the:
a. gross reciepts for July, 2013? 1,120,0CCb, output tax for the month of July, 2013 using 12% rate
198,000 2E ( 100,000 200,000
merel.
d. A VAT-registered taxpayer has the following VAT-exclusive data for the month of January 2013:
Accounts receivable, January 1, 2013 Sales on account for the month of January Cash sales for the month of
January Accounts receivable, January 31, 2013 Cash purchases for the month of January 2013
P 500,000 1,000,000 300,000

700,000400,000
How much is the output tax for the month of January, 2013 using 12% rate assuming the taxpayer is a:
a. trader. 24ean 24o aco- (2,00000 x 12%) b. service provider. IZOO-(1,1,000 X12%)
e. Babes Corp. imported an article from Japan. The invoce value of the imported article was Y1,000,000 (Y1=PO.35).
The following were incurred in connection with the importation:
Insurance
Tvonic khue(Y1, oso ooox •36) 39000

P15
,000 Freight
10,000
O, oop Postage

add: Cushms
30.000
5,
000 Wharfage dues

70.
 7
,000. Arrastre charges
Toy Cthur Orangs

8
,000 Brokerage fees

S0 000 T* rat
25,000 12%
3,000 X VAT
O DUO The
imported article was subject to P50,000 customs duties and to P30,000 exase tax.
Eu

* Facilitation fee (ret a legal Kid)

How much was the VAT on importation using 12% rate)
END
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