SUPER LAST MINUTE VAT REVIEWER

VAT-able Transactions
1. Done in the ordinary course of trade/business.
2. Sale/Barter/Exchange/Lease of goods/properties/services in the
Philippines
3. NOT VAT exempt/Zero Rated

Destination/Cross Border Principle

 No VAT shall be imposed to form part of the cost of goods to be destined
outside the territorial border of the taxing authority.

Persons Liable
 Seller/Importer

Imposition of VAT
 VAT is a tax on consumption, levied on the sale, barter, exchange, or lease
of goods or properties and services and the importation of goods in the
Philippines.

Imposition of VAT on:

Sale of goods or properties – on the gross selling price
Importation of goods – w/n the importation is for use of the business.
Services – gross receipts.

Transactions Deemed Sale – No actual sale however law deems that there is a
taxable sale. CIR will determine the tax base
 Transfer, use, or consumption not in the course of business of
goods/properties originally intended for sale or use in the course of
business.
 Distribution or transfer to shareholders, investors, or creditors.
 Consignment of goods if actual sale is not made within 60 days from the
date of consignment
 Retirement from or cessation of business with respect to inventories on
hand.

Change Or Cessation Of Statues As VAT Registered Person

 Subject to VAT
 o Change of business activity from VAT taxable status to VAT-
exempt.
 When a VAT-registered person engaged in a VAT-taxable
activity decides to discontinue such activity and engage in a
non-VAT-taxable activity.
o Approval of request for cancellation of a registration due to reversion
to exempt status.
 When a person commenced a business with the expectation that
is gross sales or receipts will exceed P1,919,500 but failed to
exceed this amount during the first 12 months of operation
o Approval of request for cancellation of a registration due to desire to
revert to exempt status after lapse of 3 consecutive years.
 When a person who is VAT-exempt and not required to register
for VAT opted to register as a VAT taxpayer and after the lapse
of 3 years desire to revert to exempt status
 NOT Subject to VAT
o Change of Control of a Corporation.
 The goods or properties used in the business or those
comprising the stock-in-trade will not be considered sold,
bartered or exchanged because the corporation still owns them.
 EXCEPT:
 Exchange of property by corporation acquiring control
for the shares of stocks of the target corporation
 Exchange properties of by a person who wants to join the
corporation of his properties held for sale or for lease for
shares of stock whether resulting to corporate control or
not.
o Change in the trade or corporate name.
o Merger or consolidation of corporations.

Zero Rated and Effectively Zero Rated Sales of Goods or Properties

 Zero Rated Sales of Service:
o 1. Processing, Manufacturing, or Repacking Goods for Other Persons
Doing Business outside the Philippines, which goods are subsequently
exported, where the services are paid for in acceptable foreign
currency and accounted for in accordance with the rules and
regulations of the BSP
o 2. Services Other than those mentioned in the preceding paragraph
rendered to a person engaged in business conducted outside the
Philippines or a nonresident person not engaged in business who is
 outside the Philippines when the services were performed, the
consideration for which is paid for in acceptable foreign currency and
accounted for in accordance with the rules and regulations of the BSP.
o 3. Services rendered to person or entities whose exemption under
Special Laws or International Agreements effectively subjects the
supply of such services to a 0% rate. (effectively zero- rated
transaction)
o 4. Sale of Services to Persons Engaged in International Shipping or
Air Transport Operations
o 5. Sale of Services for Export-Oriented Enterprise whose export sales
exceed 70% of total annual production
o 6. Transport of Passengers and Cargo by Air or Seal Vessels from the
Philippines to a Foreign Country
o 7. Sale of Power Generated through Renewable Sources of Energy

 Effectively Zero Rated: Sale to persons or entities exempt under special

laws or international agreements.

VAT Exempt Transactions

Examples:
 Sales of real properties not primarily held for sale to customers or held for
lease in the ordinary course of trade or business or sales within the low-cost
cap of below 1,919,50010 for a residential lot and P3,199,20011 for a house
and lot and other residential dwelling.
 Lease of a residential unit with a monthly rental not exceeding P12,800.
 Export sales by persons who are not VAT- registered

*Election to be not VAT exempt is irrevocable for 3 years.

Presumptive Input Tax Credit

 Persons or firms engaged in the processing of sardines, mackerel and milk,
and in the manufacturing or refined sugar, cooking oil and packed noodle-
based instant meals, shall be allowed a presumptive input tax, creditable
against the output tax, equivalent to 4% of the gross value in money of their
purchases of primary agricultural products which are used as inputs to their
production.
Transitional Input Tax Credit
 A person who becomes liable to VAT or any person who elects to be VAT-
registered shall, subject to the filing of an inventory, be allowed input tax on
his beginning inventory of goods, materials and supplies equivalent to 2% of
the value of such inventory or the actual VAT paid on such goods, materials
and supplies, whichever is higher, which shall be creditable against the
output tax.

Who may avail of input tax credit?

1. The importer upon payment of VAT prior to the release of goods from customs
custody
2. The purchaser of the domestic goods or properties upon consummation of he
sale
3. The purchaser of services of the lessee or licensee upon payment of
compensation, rental, royalty or fee
4. Purchaser of real property under cash/deferred payment basis upon
consummation of the sale or if upon installment basis upon every installment
payment

Three Scenarios in computing VAT Payable

1. Output tax = input tax - No VAT payable
2. Output tax > input tax - The excess shall be paid by the VAT-registered
person
3. Output tax < input tax - The excess shall be carried over to the succeeding
quarter or quarters