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VAT- SUBJECT TRANSACTIONS

VAT-Subject Transactions
Transactions Tax Base
1. Sales of goods or properties in the course of trade or business Gross Selling Price
2. Sale of services and lease of properties in the course of trade or business Gross Receipts
3. Importation Total Land Cost
(subject to VAT regardless of the purpose whether for business or not)
In the course of trade or business defined
The phrase 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 (irrespective of the
disposition of its net income and whether or not it sells exclusively to members on their guests) or
government entity.
The rule of regularity to the contrary notwithstanding, services as defined in the Tax Code rendered in
the Philippines by non-resident foreign persons shall be considered as being in the course of trade or
business.
Goods or Properties The term goods or services refers to all tangible and intangible objects which are
capable of pecuniary (monetary) estimation .
Sale or Exchanges of services
It means the performance of all kinds of services in the Philippines for others for a fee, remuneration or
consideration, whether in kind or cash.
Computation of VAT Payable (Excess input tax)
a. Output Tax exceeds input tax at the end of any taxable period
Output Tax xxx
Less: Input Tax (xxx)
VAT Payable xxx
b. Input Tax inclusive of input tax carried over from the previous quarter exceeds output tax
Output Tax xxx
Less: Input Tax (xxx)
VAT Payable (xxx)
Computation of the Tax Base and the Applicable Tax Rates
Transaction Tax Based Tax Rate
a. Sale of goods Gross Selling Price 12% or 0%
Gross Sales xxx
Less: Sales return and allowances xxx
Sales Discount xxx xxx
Net Sales xxx
Add: Excise Tax, if any xxx
Tax Base (excluding VAT) xxx
b. Sale of real Installment received xxx 12% or 0%
properties on Add: Interest xxx
installment plan Payment for late payment xxx xxx
(initial payment do not
exceed 25% of the gross Tax Base xxx
selling price)

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c. Sale of real Selling price stated in the sales documents or fair market value,
properties on whichever is higher.
installment plan
(initial payments exceed
25% of the gross selling
price)
d. Sales of Gross receipts computed as follows:
services Cash received (actually and constructively) xxx
Advance payments for future projects xxx
Materials charged with the services xxx
Gross receipts (excluding VAT) xxx

Note: Receivables, although earned, are not included.


e. Gross receipts Gross receipts computed as follows:
for dealer in Gross Selling Price xxx
securities Less: Acquisition Cost of Securities Sold for the month or quarter xxx
Balance xxx
Add: Other or incidental income xxx
Gross receipts (excluding VAT) xxx
f. Gross receipts Gross receipts shall refer to the following:
on the sale of a. Total amounts charged by generation, companies for the sale
electricity by of electricity and related ancillary services;
generation, b. Total amount charged by transmission companies for
transmission and transmission of electricity and related ancillary services;
distribution c. Total amount charged by distribution companies and electric
companies cooperatives for distribution and supply of electricity and related
electric service. The universal charged passed on and collected
shall be excluded from the computation of the Gross Receipts.
g. Importation a. In general
Total value xxx
Add: Custom duties xxx
Excise Tax xxx
Other charges prior to release of xxx xxx
goods from customs custody
Tax Base xxx

b. In case where customs duties is based on volume or quantity


Total landed cost xxx
Add: Excise Tax xxx
Tax Base xxx

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OUTPUT VAT
- It means the value-added tax on sale or lease or taxable goods or properties or services by any
person registered r required to register.
- In sale of goods or properties, the output tax is computed by multiplying the gross selling price
by the regular rate of VAT.
- Tax payers who exceeded the threshold (P1,919,500), are subject to VAT, whether VAT
registered or not. However, only VAT registered taxpayers can claim input tax.
- Selling price + VAT = Total Invoice Price
- If it is said to be that the Selling Price is before VAT, net of VAT, exclusive of VAT, or simply sales
per book simply multiply to 12%.
- If the selling price is said to be after VAT, gross of VAT, inclusive of VAT, or simply Total invoice
price, use 12/112 as your multiplier to get the amount of VAT.
- Examples:
Selling Price, net of VAT, P120,000 VAT= 14,400
Selling Price, gross of VAT, P240,000 VAT = 25,714.29
Sales per book, P100,000 VAT = 12,000
Selling Price including erroneous VAT, P110,000 VAT= 11,785.71

SOURCES OF OUTPUT TAXES


Sale of goods or properties Sale of services and lease if properties
a. Actual Regular Sales a. Actual Regular Sales
b. Actual Zero-rated Sales b. Actual Zero-rated Sales
c. Deemed Sales

A. ZERO RATED SALES


- a zero rated sales of goods or properties and services (by a VAT Registered Services) is a
taxable transaction for VAT purposes, but shall not result to 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 the regulations.
- example of zero-rated sales are: export sales, foreign currency denominated sales and
effectively zero-rated sales.
1. Export Sales
Export Sale of goods or properties Export Sale of services and lease of properties
1. The sale and actual shipment of the goods 1. Processing, manufacturing or repacking of
from the Philippines to a foreign country, goods for other persons doing business
irrespective of any shipping arrangement that outside the Philippines which goods are
may be agreed upon which may influence or subsequently exported;
determine the transfer of ownership of the 2. Services other than processing,
goods so exported; manufacturing or repacking rendered to a
2. Sale of raw materials or packaging materials person engaged in business conducted outside
to a non-resident buyer for delivery to a the Philippines or to a non-resident person not
resident local export oriented enterprise to be engaged in business who s outside the
used in the manufacturing, processing, packing Philippines when the service are performed;

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and repacking in the Philippines in the said 3. Services rendered to persons or entities
buyers goods; whose exemption under special laws or
3. Sale of raw materials or packaging materials international agreements to which the
to export-oriented enterprise whose export Philippines is a signatory effectively subjects
sales exceed 70% of the total annual the supply of such services to zero percent
production; rate;
4. Sale of gold to Bangko Sentral ng Pilipinas 4. Services rendered to persons engaged in
5. Those considered export sales under the international shipping or air transport
Omnibus Investment Code of 1987 and other operations, including lease of property for use
special laws. thereof;
6. The sale of goods, supplies, equipment and 5. Services performed by subcontractors
fuel to persons engaged in international and/or contractors in processing, converting or
shipping or international transport operations. manufacturing goods for an enterprise whose
Omnibus Code of 1987 export sales exceed 70% of the total annual
Considered export sales under EO No. 226: production;
a. The Philippine port FOB value determined 6. Transport of passengers and cargo by
from invoices, bills of lading, inward letters of domestic air or sea carriers from the
credit, landing certificates, and other Philippines to a foreign country;
commercial documents, of export products 7. Sale of power or fuel generated through
exported directly by a registered export renewable sources of energy. Provided,
producer, or however, that zero-rating shall not extent to
b. the net selling price of export products sold the sale of services related to the maintenance
by a register export producer to another or operation of plants generating said power.
export producer, or to an export trader that
subsequently exports the same.
2. Foreign Currency Denominated Sales
- means the sale to a non-resident of goods, except those metioned in Secs. 149 and 150 of the
Tax Code (Automobile and Non-Essential Goods, respectively), assembled or manufactured in
the Philippines for 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.

Sale of locally manufactured or assembled goods for household and personal use to Filipinos
abroad and other non-residents of the Philippines as well as returning Overseas Filipinos under
the Internal Export Program of the Government paid for in convertible foreign currency and
accounted for in accordance with the rules and regulations of the BSP shall also be considered
export sales.

3. Effectively Zero-Rated Sales


- sale of goods or property or services to persons or entities who are tax exempt under
international agreements to which the Philippine is signatory, such as, Asian Development Bank,
International Rice Research Institute, etc., shall be effectively subject to VAT at zero-rate.

B. DEEMED SALE TRANSACTION


1. Transfer, use or consumption not in the course of trade or business of goods and properties
originally intended for sale or use in the course of trade or business;

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2. Distribution or transfer to shareholders or investors as share in the profits of VAT-registered
person;
3. Distribution or transfer to creditors in payment of debt or obligation;
4. Consignment of goods if not sold within 60 days following the date of the consignment;
5. Retirement from or cessation of business with respect to all goods on hand, whether capital
goods, stock-in-trade, supplies or materials as of the date of such retirement or cessation, whether
or not the business is continued by the 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 between 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).

Sale, Transfer, or Exchange of Imported Goods by Tax-Exempt Persons


a. In the case of goods imported into the Philippines 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 the said goods.

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