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VAT ON SALES OF GOODS OR PROPERTIES

1. Sales
a. Good/prop
b. Services of VAT registered business, other than those zero VAT rated,
VAT exempt, or OPT
2. Deemed sales consumptions or transfers by VAT registered

Vatable could be registrable, not registered but still subject to OPT provided
that total gross receipts doesnt exceed 1,919,500 per year
Seller should be VAT registered, para ma VAT ang less than 1,919,500
transactions
VAT Registrable person - exceed 1,919,500 threshold pero di nagregister:
- Subject to output
- Not allowed to deduct Input VAT
TRANSACTIONS NOT ALLOWED TO DEDUCT INPUT VAT
a. Non vat registered with GROSS RECEIPTS of MORE THAN 1,919,500
(exclusive of VAT exempt and exclusively subject to OPT)
b. Non vat FRANCHISE GRANTEE of RADIO and tv broadcasting with
ANNUAL GROSS RECEIPTS of more than 10,000,000
c. IMPORTATIONS except specifically exempted
d. Local payment RENT OF VESSEL OR CARRIERS owned by
NONRESIDENT FOREIGN entity (Bayad sa non resident foreign entity
for rent of vessel or carrier)
TAXABLE BASE
1. Gross selling price INCLUDING EXCISE TAX, excluding vat
a. Purchase price
b. Charges for packing, delivery, insurance
c. Excise taxes (depends)
d. Invoice amount
2. Actual SELLING PRICE one of parties in sale is goverment
Allowable deductions
1. Sales returns and allowances DURING MONTH OR QUARTER with proper
credit or refund
2. Sales discount WITHIN SAME MONTH OR QUARTER when all conditions met:
a. Determined and granted at time of sale
b. Expressly indicated in invoice
c. Should form part of gross sales

d. Granting of discount does not depend on happening of future event


(Ex. cash discount if paid within 10 days)
3. Trade discount bulk transactions
UNALLOWABLE deductions for Business tax
*but these deductions are ALLOWED for INCOME TAX
1. Sales discount due to meeting quotas
2. Sales discount due to prompt payment
12% REGULAR VAT
1. Wholesale and retail
2. Manufacturing (tobacco, alcohol, petroleum,automobiles, non essentials
(excisable goods), cement, food and beverages, pharmaceuticals, flour,
sugar, pesticide)
3. Real estate
4. Mining and Quarrying
5. Importation of goods
VAT on sale of Goods or Properties

All tangible and intangible capable of monetary estimation


Must be related to trade or business
Must be consummated in Ph regardless of payment terms

*Capital asset- sale of personal asset is not business related , therefore NO VAT
*Ordinary asset(inventory or other properties primarily used in business) are
SUBJECT TO VAT and income tax

Manufacturing business:
Production cost:
RM used
+Supplies used
+Labor to employees
Total production cost
+ MARK UP
+Excise Tax
TAXABLE BASE (SELLING PRICE)
Supplies purchased and Raw Materials purchased = subject to INPUT VAT

INVENTORY/GOODS USED IN THE COURSE OF BUSINESS = NO OUTPUT VAT


* BOTH ARE SUBJECT TO INPUT VAT and can be claimed as TAX CREDIT as long as
these goods are used in business
1. To PROMOTE SALES EFFORTS in the course of BUSINESS
2. Office supplies
a. NOT PRIMARILY FOR SALE
b. Consumed for BUSINESS PURPOSE
*Goods used as sample = Not a purchase: no input vat and output vat
SALE OF SCRAP MATERIALS by a VAT REGISTERED PERSON
-

Empty drums, plastic bags, cartons, wood crates, obselete inventories


Fully depreciated fixed assets sold at:
o Minimal prices or
o Lower than Purchase price

SALE OF REAL PROPERTY


-

Not only buildings but includes rights and interests


Land and any property attached directly to land

1. GROSS SELLING PRICE: higher among


a. Condideration stated in Sales Document
b. FMV available AT TIME OF EXECUTION OF CONTRACT OF SALE/SELL,
whichever is HIGHER
i. Zonal Value (determined by comissioner)
ii. Schedule of value of Provincial City Assessors
2. VAT NOT BILLED SEPERATELY IN SALES DOCUMENT
Selling price HIGHER than FMV
= selling price is VAT INCLUSIVE

Selling price is LOWER than FMV


= zonal value is VAT EXCLUSIVE

To get output vat:

Selling price/Consideration stated:


Add: VAT: FMV (higher) * 12%

Selling price * 12/112

SELLING PRICE: VAT INCLUSIVE

SALE OF CAPITAL ASSET AND ORDINARY ASSET REAL PROPERTY = NO VAT


-

With CAPITAL GAINS TAX 6% based on higher between Sales price/FMV

SALE OF REAL PROPERTY PRIMARILY HELD FOR SALE OR LEASE IN NORMAL


COURSE OF BUSINESS(INV/ORDINARY ASSET) = WITH VAT
EXCEPT: (no vat sale)

1. RESIDENTIAL LOT with Selling price: 1,919,500 and below


2. HOUSE AND LOT /RESIDENTIAL DWELLINGS with selling price at: 3,199,200
and below
*selling price: meaning= PRICE OF EACH TYPE
REAL PROPERTY SOLD

Casual sale(capital
asset)
Regular sales
(ordinary asset)
Commercial
property
Parking lot

Residential Lot

Residential house &


lot/ Residential
dwelling

THRESHOLD SALES
PRICE
Not applicable bc NO VAT

BUSINESS TAX

Not applicable(with vat


regardless mareach
threshold or not)
Not applicable(with vat
regardless mareach
threshold or not)

12% VAT

1,919,500 or less

EXEMPT VAT AND OPT

More than 1,919,500

12% VAT

3,199,200 or less

EXEMPT from VAT and


OPT

More than 3,199,200

EXEMPT ALL KINDS OF


BUSTAX

12% VAT

12% VAT

Real property inventory sold for RESIDENTIAL PURPOSE:


-

Threshold dependent
Exemptions apply only to them

2 OR MORE ADJACENT RESIDENTIAL LOT ARE SOLD OR DISPOSED WITHIN


12 MONTHS WITH ONE BUYER AND SELLER:
VAT EXEMPT if:
-

AGGREGATE value of Residential Lot: does not exceed 1,919,500

AGGREGATE value of House and lot: doesnt exceed 3,199,200

*anong basis ng value? Higher or Selling price

INSTALLMENT SALE OF REAL PROPERTY


INITIAL PAYMENT of SELLING PRICE(from agreement) (w/o vat) IS 25% OR
LESS OF GROSS SELLING PRICE(higher between SP or FMV) (w/o vat)
-

Installment received
ADD: interest (prorate months)
Other charges:
Surcharge (not prorate)
Taxable base

INITIAL PAYMENT IS ABOVE 25% of threshold


-

Recognize as cash sale


Higher FMV or SP times 12% = Output vat agad agad

INITIAL PAYMENT FORMULA:


Down payment
+ Cash or property received during the year of sale(other than notes or other
evidences of indebtedness issued by buyer)
+ Excess of mortgage of property sold over the cost or basis to the seller
Total
LESS: amount of mortgage on real property sold
Initial payment
VAT IF FMV IS HIGHER THAN SELLING PRICE and 25% AND LESS
Actual collection(Initial payment+installment) without vat DIVIDED BY Agreed
consideration or Selling price agreement without vat
x higher between Zonal or FMV
x 12%
Output vat

For installment sales, input and output vat si recognized upon receipt of every
installment

ADDITIONAL VAT ON INSTALLMENT SALE OF REAL PROPERTY

Zonal or MV at DATE OF SALE > Total receipts or collections AS OF DATE


based on agreed consideration
= additional vat payable
DEEMED SALE TRANSACTIONS
- not actual sales but by legal fiction considered sale due to irregular disposal
by VAT registered
- purpose is to recover input vat that might have been credited in previous
period
- Taxable base
o (actual) Market value as of occurence of transaction cosidered sale
o Lower of cost/market method- LOWER acquisition cost or current
market price
o CIR valuation GROSS SELLING PRICE is UNREASONABLY
LOWER(more than 30%) than ACTUAL MARKET VALUE of same goods
of same quality/quantity in IMMEDIATE LOCALITY or NEAREST DATE OF
SALE
Comissioner will determine appropriate tax base for 12%
- VAT REGISTERED TAXPAYER MAY TAKE ADVANTAGE of 30% discount within
threshold of reasonable selling price which is 30% discount of actual
market value
- UNREASONABLE: Mas mababa ang Selling price sa Market value ng
more than 30%
- REASONABLE: 30% lower ang Selling price sa Market value
Gross selling price
LESS Max discount allowed
30%
Reasonable taxable base
X 12% vat
OUTPUT VAT

LIMITATION TO DEEMED SALE TRANSACTIONS:


1. Generally, not allowed to use unreasonable gross selling price
2. Only to ordinary asset
3. VAT exempt and OPT transactions are NOT COVERED by deemed sale. Only to
transactions subject to VAT.
4. Any LOSS related to deemed sales transactions are NON DEDUCTIBLE for INC
TAX PURPOSE

BASIS
1. Transfer or use NOT in the
course pof business of
goods/properties ordinary
intended for sale in the course
of sale
(Intended for sale or use in
business to personal use real
quick)

MARKET VALUE (higher


between FMV and SP)t

NOTES:
-

2. Distribution or transfer to:


a. Shareholders or
investors as profit
sahres
b. Creditors in payment of
debt

3. Consigned goods not sold after


60 days (no actual sales in 60
days)
4. Retirement from or cessation
of business with respect to ALL
GOODS ON HAND(at date of
retirement/cessation)
- Capital goods
- Stock in trade/inv goods
- Supplies or materials
A. Change of ownership
B. Dissolution and creation of
new partnership
C. Incorporation of single
proprietorshop
5. Changes in business tax status
of vat registered tax payer

a. MARKET VALUE/cost
b. MV: of debt settled

NON VAT= Held in


trust
WITH VAT= Sale,
lease, use in ordinary
course of
trade/business and
transfer is
COMPLETED GIFT
(deemed sale)
Completed gift:
transferor divests
himself absolutely of
control over property
(irrevocable)
VAT REGISTERED
PERSON
Page 520 valencia,
bakit di imputed sa
selling price ung vat?
Bakit base on cost
kung market value
ung deemed sale sa
sample?

MARKET VALUE if silent


except expressly stated na
cost
ACQUISITION COST OR
CURRENT MARKET VALUE
(LOWER)

Considered sales bc
there was a previous
input vat, so dapat
mabenta even if
theres no actual sale
and used for non
business purpose

VAT registered
changes or
terminates VAT
statUS
INVENTORY GOODS

INCORPORATION = ASSETS
ONLY (RM, FG, PPE, F&F)

LOWER BETWEEN COST OR


MARKET VALUE

DISPOSED OFF or
EXISTING AS OF A
CERTAIN DATE
(remaining)
NOT TRANSACTIONS DEEMED SALE (NO VAT)
1. CHANGE IN CORPORATE CONTROL Goods/prop held for lease or used in biz
EXCEPT:
- WITH VAT= EXCHANGE OF
GOODS/PROP/REAL ESTATE PROP
used IN BUSINESS OR HELD FOR
SALE OR FOR LEASE BY
TRANSFEROR. FOR SHARES OF
STOCK whether resulting from
corporate control or not
2. CHANGE IN TRADE/CORPO NAME
3. MERGER OR CONSOLIDATION OF
CORPORATION

UNUSED INPUT TAX the DISSOLVED


CORPO as of the date of merger or
consolidation shall be ABSORBED by
SURVIVING CORPORATION

VAT OF HUSBAND AND WIFE:


- Threshold of 1,919,500, husband and wife are separate taxpayers.
- Aggregation rule for each taxpayer shall apply.
o TOTAL of all lines of business = if exceeding 1919500 subject to VAT
o Professional fee- non vat
- Vat exempt not included in determining threshold

TRANSACTIONS WITH GOVERMENT UNITS(DI KO GETS HONESTLY)


- Either 12% VAT or OPT
- Subject to output vat but creditable input vat is comprised of Siv and final
witholding VAT
- Actual input vat is not deductible from output VAT on sales to gov
- Creditable witholding inc tax is to be crdited against quarterly or annual inc
tax due
- Debit of inc and expense summary or Cost of sales or Operating expense is
done monthly or quarterly
- Since Final witholding VAT is only 5% base on Sales to gov, remaining 7% is
SIV for sales of goods or services to gov in lieu of AIV directly attributable or
ratable apportioned to such sales.
-

PHIL gov and political subdivisions, instrumentalities, agencies, including gov.


Owned and controlled corpo BEFORE MAKING PAYMENT ON ACCNT of PURCHASES
OF GOODS&SERVICES shall: DEDUCT AND WITHOLD
o Vat registered seller: Final VAT of 5%
o Non VAT seller subject to OPT of 3%: Percentage tax of 3%
In addition to above: gov will also deduct and witheld the following creditable
withold income taxes:
1% on purchases of goods
- 2% on purchases of servcies

ACTUAL INPUT VAT>


STANDARD INPUT VAT
If AIV to sale of gov is more
than 7% of gross payments the
excess: expense or cost

ACTUAL INPUT
VAT<STANDARD INPUT VAT
If AIV to sale of gov is less than
7% of gross payments the
excess: taxable other
income

S= without vat
OUTPUT VAT(S*12%)
LESS: STANDARD INPUT
VAT(S*7%)

OUTPUT VAT(S*12%)
LESS: STANDARD INPUT
VAT(S*7%)

VAT PAYABLE
LESS: FINAL WITHOLDING VAT
(S*5%)

VAT PAYABLE
LESS: FINAL WITHOLDING VAT
(S*5%)

NET VAT PAYABLE

NET VAT PAYABLE

Actual input vat


(purchases*12%)
LESS STANDARD INPUT

Actual input vat


(purchases*12%)
LESS STANDARD INPUT

MIXED

VAT(sales*7%)

VAT(sales*7%)

COST OF SALE

Income