BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 51 SUGGESTED ANSWERS

Chapter 10: MIXED BUSINESS TRANSACTIONS

CHAPTER 10

MIXED BUSINESS TRANSACTIONS

Problem 101
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. True False True True True False True False False True

True or False

5% only.

the VAT exemption is applicable only for residential units. - Transport of passengers by land is not subject to VAT. the gross receipts should be more than P1,500,000.

Problem 102 1. True 2. False 5% only. 3. True 4. True 5. True 6. True 7. False It must be prorated based on sales. 8. True 9. True not subject to VAT, gross receipts do not exceed P1,500,000. 10. True Problem 10 3 1. 2. 3. 4. Final VAT withholding is 5% and 2% on purchase of services of the contract price before VAT. VAT refund is P10,000. None. Zero rated transaction. None. Sale of capital asset is not subject to business tax.

5. Total business tax is P1,800,000, computed as follows:

OPT on passengers by land (P20,000,000 x 3%) VAT on passengers by air (P10,000,000 x 12%) Total business taxes 6. P2,100,000 OPT (P10,000,000 x 3%) Add: VAT (P10,000,000 x 12%) Surcharge (P1,200,000 x 50%) Business taxes including surcharge P 600,000 1,200,000 P1,800,000 P 300,000 P1,200,000 600,000 1,800,000 P2,100,000

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 52 SUGGESTED ANSWERS
Chapter 10: MIXED BUSINESS TRANSACTIONS

7.

P432,000 Invoice cost Custom duty (P2,000,000 x 50%) Excise tax (P3,000,000 x 20%) Total landed cost Multiplied by VAT rate Input VAT P2,100,000 Output VAT (P1,000,000 x 12%) Less: Amortized input VAT (P432,000/60) VAT payable Note: Assume for the month VAT payable

P2,000,000 1,000,000 600,000 P3,600,000 12% P 432,000 P120,000 7,200 P112,800

8.

9.

P600,000 Output VAT (P5,000,000 x 12%) year of sale (Downpayment is more than 25% considered as cash sales)

P600,000

10. P120,000 Required output VAT (P6,000,000 x 12%) Less: Output VAT collected year of sale Additional output VAT 11. P80,000 Unsold inventory at cost Multiplied by Output VAT Less: Input VAT VAT payable Note: Asset at retirement is taxed at lower of cost or market. 12. P360,000 VAT payable (P3,000,000 x 12%) 13. P184,000 Output VAT (P1,600,000 x 12%) Less: Input VAT Presumptive input VAT Total manufacturing cost (P300,000/60%) Less: Conversion cost Direct material used fish Multiplied by presumptive input VAT VAT payable 14. P184,000 Output VAT (P1,000,000 x 40%) x 2 x 12% Less: Input VAT Transitional input VAT (P1,000,000 x 2%) VAT payable 15. P192,000 Business tax VAT (P1,600,000 x 12%)

P720,000 600,000 P120,000 P 500,000 12% P 60,000 40,000 P 20,000

P 360,000 P192,000 P500,000 300,000 P200,000 4%

8,000 P184,000 P96,000 20,000 P76,000 P192,000

VAT taxable because these are commercial units and yearly gross receipts exceeds P1.5M.

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 53 SUGGESTED ANSWERS
Chapter 10: MIXED BUSINESS TRANSACTIONS

16. P192,000 Output VAT (P1,600,000 x 12%) 17. P3,840,000 Output VAT (P10,000,000 x 3 months) x 12% Less: Input VAT (P1,120,000/9.3333) VAT payable Problem 10 4 C Output VAT (P1,125,000 x 12%) Less: Input VAT prorated [P80,000 x (P1,125,000+ P300,000)/P1,500,000] Net VAT payable Problem 10 5 B Output VAT (P600,000 x 12%) Less: Creditable Input VAT (P330,000/9.3333) x (P600,000/P900,000) Net VAT payable

P192,000 P3,600,000 120,000 P3,840,000 P135,000 76,000 P 59,000 P72,000 23,572 P48,428

Notes: 1. The printing of books is VAT-exempt under Sec. 109y of NIRC. 2. The printing of other forms is subject to VAT and, correspondingly, should be allowed with Input VAT. The expected amount of gross receipts for taxable transaction is P600,000 x 4 = P2,400,000. 3. If the Input VAT is not directly identifiable with the portion of sale that is allowed to creditable Input VAT, then it is allocated based on the total sales. Problem 10 6 B Amount inclusive of VAT and net of income tax withheld Divided by VAT taxable receipt Output VAT (P25,000 x 12%) Problem 10 7 C Gross receipts professional fees Add: Value-added tax (P1,000,000 x 12%) Total Less: Withholding income tax (P1,000,000 x 15%) Actual cash received Problem 10 8 A Gross billings including VAT (P50,000 x 1.12) Less: Withholding income tax (P50,000 x 10%) Actual cash received Problem 10 9 C Percentage tax - passengers (P2,000,000 x 3%) Vatable transactions - cargoes (P1,600,000 x 12%) Total business tax P P26,250 1.07% P24,532 P 3,000 P1,000,000 120,000 P1,120,000 150,000 P 970,000 P 56,000 5,000 P 51,000 60,000 192,000 P252,0000

Notes: Additional amount charged in ordinary bus fare tickets issued by common carrier for passengers excess baggage is subject to VAT. (BIR Ruling 094-99)

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 54 SUGGESTED ANSWERS
Chapter 10: MIXED BUSINESS TRANSACTIONS

Although there is actual Input VAT paid, this could not be claimed as tax credit because the business is non-VAT registered. Problem 10 10 C Common carriers tax (P1,400,000 x 3%) Output VAT (P600,000 x 12%) Total business tax Less: Creditable Input VAT (P560,000/9.3333) x P600,000/P2,000,000 Net business tax payable P 42,000 72,000 P114,0000 18,000 P 96,000

Notes: Additional amount charged in ordinary bus fare tickets issued by common carrier for passengers excess baggage is subject to VAT. (BIR Ruling 094-99) The creditable Input VAT is prorated between the Vatable and VAT-exempt gross receipts. Problem 10 11 B Output VAT (P2,000,000 x 3 months x 12%) Less: Input VAT (P560,000/9.333) VAT payable Problem 10 12 B Output VAT of Y (P500,000 x 12%) Less: Input VAT paid to Z (P448,000/9.3333) VAT payable Problem 10 13 C Total domestic cash sales (P110,000 + P55,000) Multiplied by VAT rate Total Output VAT Problem 10 14 1. Output VAT on domestic sales (P2,000,000 x 12%) Output VAT on sale to government units (P125,000 x 12%) Amount of output VAT Note: Export sales are zero-rated but allowed of Input VAT. 2. Input VAT from importation (P1,008,000/9.3333) Input VAT from domestic purchases (P560,000/9.3333) Total Input VAT Input VAT domestic sales (P168,000 x P2,375,000/P2,500,000) Standard input VAT government sales (P125,000 x 7%) Total creditable input VAT Note: The P840 actual input VAT on sales to government cannot be claimed as creditable input VAT, but the standard input VAT which is 7% of the sales to the government. 4. Total output VAT Less: Total creditable input VAT Final withholding VAT government (P125,000 x 5%) Net VAT payable P255,000 P168,350 6,250 174,600 P 80,400 P108,000 60,000 P168,000 P159,600 8,750 P168,350 P720,000 60,000 P660,000 P60,000 48,000 P12,000 P165,000 12% P 19,800 P 240,000 15,000 P 255,000

3.

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 55 SUGGESTED ANSWERS
Chapter 10: MIXED BUSINESS TRANSACTIONS

Problem 10 15 1 Input tax on taxable goods . Input tax on zero-rated sales Standard input tax government sales (P100,000 x 5%) Input tax on depreciable capital goods not attributable to any specific activity (monthly amortization for 60 months) P200,000/P400,000) Creditable input tax for the month 2. 3. Standard input VAT (P100,000 x 5%)

P 5,000 3,000 5,000 = (P20,000 x 10,000 P23,000 P5,000

Zero, because VAT exempt sales are not entitled to Input VAT. P120,000

Problem 10 16 1 Net VAT payable = final VAT (P1,000,000 x 12%) . 2 . None, because the VAT paid is final.

Problem 10 17 Output VAT (P150,000 + P30,000) x 12% Less: Input VAT (P134,400/9.3333) Net VAT payable Assume that the business is VAT-registered.

P 21,600 14,400 P 7,200

Note: It is implied that the total collection of the real estate lessor on residential units would be more than P1,500,000 per year. (P150,000 x 12) = P1,800,000. Problem 10 18 Gross receipts Currency adjustment factor Documentation charges Processing charges Third party service provider: Freight charges Carrier security charges Trucking fee Advance manifest surcharge Actual commission income 2 . Outbound movement Local origin charges: Currency adjustment factor Documentation charges Processing charges Actual commission income Inbound movement Local destination charges: P 6,000 10,000 8,000 30,000 P400,000 P 6,000 10,000 8,000 250,000 50,000 30,000 16,000

370,000 P 30,000

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 56 SUGGESTED ANSWERS
Chapter 10: MIXED BUSINESS TRANSACTIONS

Trucking fee Advance manifest surcharge Total taxable based Multiplied by VAT rate Output VAT Problem 10 19 Percentage tax (P10,000,000 x 3%) VAT (P10,000,000 x 12%) Surcharge (P1,200,000 x 50%) Total business tax liability Problem 10 20 1. Gross receipts of the contractor (P1,116,000/93%) Note: The 93% is computed by deducting the 5% final VAT and 2% withholding income tax from 100%. 2. 3. Final VAT withheld (P1,200,000 x 5%) Income tax withheld (P1,200,000 x 2%)

30,000 16,000 P100,000 12% P 12,000 P 300,000 1,200,000 600,000 P2,100,000 P1,200,000

P 60,000 P 24,000

Problem 10 21 Output VAT from: Cash sales to VAT persons (P300,000 x 12%) Cash sales to Non-VAT persons (P100,000 x 12%) Cash sales to government units (P200,000 x 12%) Credit sales to VAT persons (P400,000 x 12%) Sales return (P10,000 x 12%) Less: Input VAT from: Purchases from VAT person per invoice (P324,800/9.3333) Payment of services for business purposes, gross of VAT (P72,800/9.3333) Standard input VAT government (P200,000 x 7%) VAT payable Less: Final withholding VAT government (P200,000 x 5%) Net VAT payable

P 36,000 12,000 24,000 48,000 ( 1,200) P 34,800 7,800 14,000

P118,800

56,600 P 62,200 10,000 P 52,200

Notes: 1. The sales discount is generally a cash discount that depends on the happening of future events which is the prompt payment of customers. This sales discount is not allowed to be deducted for VAT purposes. (Sec. 4.106-9, R.R. 14-2005) 2. The 5% final withholding VAT is deductible from output VAT on sales to the government.