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COVERAGE OF

THE VALUE-ADDED
TAX
I. VAT on sales or lease of goods,
properties and services;

a) Sales on goods and properties


b) Transactions deemed sale
c) Sales of Services and use or
lease of properties
CLASSIFICATION OF
SALES/TRANSACTIONS
1. Exempt Sales
-exempt from VAT
2. Zero Rated Sales
-subject to zero percent VAT rate
3. TAXABLE SALES
-subject to 12% VAT rate
What does the law says?
The NIRC under section 105 provides
that any person who, in the course of
his trade or business, sells, barters,
exchanges, leases goods or
properties, renders services, and any
person who imports goods (unless
their transactions are VAT exempt or
zero-rated) shall be liable to the 12%
VAT rate imposed in Sections 106,
107 and 108 of the NIRC.
Receipt samples with VAT
Receipt samples with VAT
Computation of VAT on Sale of
goods
Tax Exclusive Method
the VAT is presumed not yet included in the
tax base amount. Such amount representing
the taxable base (exclusive of vat), whether
gross sales price or gross sales receipts, is
multiplied by 12% vat rate. The resulting
product is the VAT due or output tax, as the
case maybe. This is normally the method
adopted by the seller when it prepares the
sales invoice on its sales transactions.
Computation of VAT on Sale of
goods
Tax Inclusive Method
the VAT is presumed to be already
included in the tax base amount. Such
amount representing the taxable base
(inclusive of vat), whether invoice sales
price or invoice gross receipts, is multiplied
(12/112) vat factor. The resulting product
is the vat due or output tax as the case
maybe. This is usually the method adopted
by the BIR in its tax audits/examinations.
Computation of VAT on Sale of
goods
VAT Exclusive Method Formula:
Gross Sales/Gross Sales Receipt (excluding VAT) x
12% = VAT
e.g. Gross Sales of a restaurant in a day

P50,000 x .12 = P6,000

VAT Inclusive Method Formula:


Invoice Price/Invoice Receipts (including VAT) x
(12/112) = VAT
e.g. (ditto)

P56,000 x (12/112) = P6,000


b) Transactions deemed
sale
Transfer, use or consumption not in the course of
business of goods or properties originally
intended for sale or for use in the course of
business.
*Transfer of goods or properties not in the course
of business can take place when the VAT-
registered person withdraws goods from his
business for his personal use.
Distribution or transfer to:
(a) shareholders as share in the profits of the
VAT-registered person.
*Property Dividends which are distributed by the
company to its shareholders and declared out of
retained earnings shall be subject to VAT (12%)
b) Transactions deemed sale
Consignment of goods if actual sale is not made within 60
days following the date such goods were consigned.
*Consigned goods returned by the consignee within the
60-day period is not deemed sold.
Retirement from or cessation of business with respect to
inventories of taxable goods (all goods on hand, whether
capital goods, stock-in-trade, supplies or materials)
existing as of the date of such retirement.
(a) Change of ownership of the business. There is a
change in the ownership of the business when a sole
proprietorship incorporates; or the proprietor sells his
entire business.
(b) Dissolution of a partnership and creation of a new
partnership which takes over the business.
*tax base shall be the acquisition cost/current market
price whichever is lower.
b) Transactions deemed sale
Formula:
Gross Value of Goods deemed sold (excluding VAT) x 12%
= VAT

e.g. A at the time of retirement has 1,000 pcs of


merchandise which was deemed sold at a