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VALUE ADDED TAX

Presented by:

LEMUEL C. DUADUA
Revenue Officer I
RDO 112 Tagum City

Topic Outline

Basic concepts of VAT


Output Tax and Input Tax
Transitional Input Tax Credits
VAT on Government Sales
Filing and Payment Due Dates
Staggered Filing
Summary List of Sales and Purchases

REFERENCES :
TITLE IV of the NIRC Sec. 105 to 115
Under Republic Act 9337 and its implementing
regulations/issuances to wit:
RR 16 - 2005
RR 2 2007
RR 4 2007
Other related revenue orders and circulars

What is VAT?
It is a tax on the value added to the purchase
price or cost in the sale or lease of goods,
properties, or services in the course of trade or
business.
It is an indirect tax and the amount of tax may
be shifted or passed on to the buyer, transferee
or lessee of the goods, properties or services.

Who are considered as VAT


taxpayers?
Seller of goods
Seller of services
Importers
Lessor of Real Properties

TRANSACTIONS COVERED
Sale or Exchange of Goods / Properties
Importation
Sales or Exchange of Services
Transaction Deemed Sales
Zero-Rated Sales of Goods /
Properties / Services
Effectively Zero-Rated Transactions

BASIS OF VAT
Sale of Goods

Gross Selling Price means


the total amount of money or its equivalent
which the purchaser pays or is obligated to
pay to the seller of the goods or properties
excluding VAT.

Rules on Sale of REAL PROPERTIES


Sec.106 of NIRC [RR 16 2005; RR 4-2007; RR 16-2011]

Sale of residential lot where GSP > P1,919,500.00 or


residential house and lot where GSP > P3,199,200.00
[VATable under Sec. 109 and per RR 16-2011]

Installment Sale of Real Property


when the initial payments of which in the year of sale do not exceed
25% of the GSP
installment payments including interests and penalties actually or
constructively received is subject to 12% VAT

Deferred payment basis of Real Properties


Initial payments in the year of sale exceeds 25% of the GSP
Treated a cash sale which make the entire SP taxable in the month of
sale.

BASIS OF VAT
on Importation (Sec. 107)

If based on VALUE
TOTAL VALUE used by the BOC in determining:
Tariff plus custom duties and excise taxes, if any;
Other charges paid by the importer (prior to ATRIG)

If based on QUANTITY and VOLUME


VAT shall be based on the LANDED COST plus EXCISE
TAXES

10

BASIS OF VAT
Sale of Service and Lease of Property

Gross Receipts
refers to the total amount of money or its equivalent
representing the contract price,
compensation, service fee, rental or royalty,
including the amount of charged for materials
supplied with the services ,
deposits applied as payments for services rendered,
and
advance payments actually or constructively received

11

Transactions deemed sale

(Sec.
106 B)

Transfer, use or consumption not in the course of


business of goods or properties intended for sale or used
in business.
Distribution or transfer of goods or properties to:
Shareholders/investors share in the profit of VAT-registered person.
Creditors in payment of debt or obligation.

Consignment of goods if actual sale is not made within


60 days ff. the date such goods were consigned.
Returned goods w/n 60-day period are not deemed sale.
Retirement from or cessation of business with respect to
all goods at hand.

12

Change or Cessation of Status as VAT


Registered
Subject to Output Tax (deemed sale)
o Change or cancellation of business activity from VAT to
exempt status
o Cancellation of registration, of a person who voluntarily
registered despite being exempt, to revert to exempt status
after the lapse of 3 years
o Cancellation of registration of a VAT registered person who
failed to exceed P1,912,500 during the 12 month period.
Not Subject to Output Tax (not deemed sale)
o Change of control; Change in trade name of business; and
Merger or consolidation of corporations

13

Transactions deemed sale


The Comm. of Internal Revenue shall determine the
appropriate tax base in cases where a transaction is deemed
a sale, barter or exchange of goods or properties or where
the gross selling price is unreasonably lower (lower by more
than 30%) than the actual market value.
Tax Base
[Output Tax = 12% x MV of goods deemed sold]

If one of the parties in the transaction is the govt, the


output VAT on the transaction shall be based on the actual
selling price
In case of retirement or cessation of business: tax base
shall be the acquisition cost or current market price of goods

14

Rules on invoicing and recording of


transactions deemed sale
For distribution to shareholders and creditors
o invoice shall be prepared at the time of the occurrence
of the transaction recorded in the subsidiary journal
For retirement or cessation of business
o inventory shall be prepared and submitted to RDO not
later than 30 days from retirement
o invoice shall be prepared for the entire inventory
o entry in the subsidiary sales journal

Zero-rated sales

15

It is a taxable transaction for VAT purposes but


shall not result in any output tax. Input tax on
purchases related to such zero-rated sales shall be
available as tax credit
A. Export sales
B. Foreign currency denominated sales
C. Effectively zero-rated sales

16

VAT Rates:

10% (up to January 31, 2006)


12% (effective 2-1-06) and
0%

17

Output Tax ( Sales x 12%)


x

VAT Payable
-

Less Input Tax (Purchases x 12%)


xxx
VAT payable
xx

P xx
-

P x

Output Tax

18

Means the value-added tax due on the sale or


lease of taxable good or property or service
by a VAT-registered person.
VAT Rates: 12% or 0%
Example :

Sales
VAT Rate
Output tax-

P100,000.00
-

12%
P 12,000.00

19

INPUT TAX
Is the value added tax due from or paid by a VATregistered person in the course of his trade or
business.

Input Tax

Sources of Input Tax


Purchase or importation of goods
20

For sale; or
For conversion into or intended to form part of a
finished product for sale including packaging
materials; or
For use as supplies in the course of business; or
For use as materials supplied in the sale of service;
or
For use in trade or business for which deduction for
depreciation / amortization is allowed under the
Tax Code

21

Sources of Input Tax (cont)

Purchase of services on which VAT has been actually


paid
Purchase of real properties for which the VAT was
actually paid
Purchase of services for which the VAT was actually paid
Transitional input tax
Presumptive Input tax
Standard Input Tax (govt. transaction)

22

Spread of VAT on Capital Goods


Input Tax on depreciable capital goods, the
aggregate acquisition cost of which (net of
VAT) in a calendar month, exceeds
P1,000,000 shall be spread evenly over 60
months or their useful life, whichever is
shorter.

23

Spread of VAT on Capital Goods


Example: Purchase of transportation equipment
of P1,200,000 exclusive of VAT.
Input Tax is (P1,200,000 x 12%) =
P144,000.00
Monthly Input Tax for 60 mos. =
2,400.00

VAT Payable

24

Output Tax

P 12,000.00

Less Input Tax:


Purchase of materials

2,329.71

Purchase of Trans Equipment


4,729.71

2,400.00

VAT Payable
7,270.29

25

Transitional Input Tax


A person becomes liable to VAT or elects to be
VAT registered person shall be allowed input
tax of 2% of the value of inventory or the
actual VAT paid, whichever is higher
Subject to the filing of inventory list

26

Transitional Input Tax


Example:
Mr. A becomes liable to VAT starting Jan. 2015.
He has P200,000 worth of inventory. Actual VAT
payments on purchases from VAT registered
suppliers were P18,000.00.
Allowed transitional input tax: P18,000
The 2% of P200,000 (P4,000) is lower than
P18,000

Presumptive Input Tax

27

4% of the gross value in money of purchases of primary


agricultural products which are used as inputs to their
production:
Sardines
Mackerel and milk
Refined sugar
Cooking oil
Packed noodle-based instant meals

28

VAT on Government
Transaction
Sale of goods and services to government is
subject to 12% VAT;
The 5% VAT withheld represents the net VAT
payable of the seller
The remaining 7% effectively accounts for the
standard input tax in lieu of the actual input VAT

29

VAT on Government
Transaction

If actual input > 7% of gross payments, the


excess may form part of the sellers cost;
and
If actual input VAT < 7% of gross payments,
the difference must be closed to expense or
cost.

VAT on Government
Transaction

30

Sales (P200,000 x 12%) = P24,000.00


Standard Input
(P200,000.00 x 7%) =

VAT Payable

14,000.00

P 10,000.00

Less 5% Final Withholding Tax


VAT Payable P

-0-

10,000.00

31

Apportionment of input tax


on mixed transactions
Input tax directly attributed to VATable
transactions may be recognized for input tax
credit
Input tax directly attributable to VATable sales
to government shall not be credited against
output tax from sales to non-government
entities

32

Apportionment of input tax


on mixed transactions

Input tax that cannot be directly attributed to either


VATable or exempt transaction shall be pro-rated and
only the ratable portion can be allowed as tax credit
Input tax attributable to VAT exempt transaction
shall not be allowed as tax credit but should be
treated as part of cost or expense
Input tax attributable to the zero-rated sales may be
refunded or applied for tax credit certificate

Apportionment of Input Tax on Mixed Transactions


33

Taxable sales to private


X
Total sales

Input Tax

Creditable

Taxable sales to govt.


Total sales

Input Tax

Creditable *

Taxable sales 0%
Total sales

Input Tax

Refundable

Exempt sales
Total sales

X Input Tax

* Subject to the 7% standard input tax provision

Expense or cost

34

Penalty for Failure to Register


as VAT Taxpayer

Taxpayer shall be liable to pay the


tax as if he was a VAT registered
person
Taxpayer cannot avail of the
benefits of input tax credit for the
period he/it was not properly
registered.

35

Accounting Requirements
All persons subject to VAT shall in addition
to regular accounting records, maintain
the following:
SUBSIDIARY SALES JOURNAL
SUBSIDIARY PURCHASE JOURNAL

36

Filing of Return
MONTHLY RETURN (2550M)
every 20th day of the following the close of each month; and
QUARTERLY RETURN (2550Q)
- every 25th day following the close of each taxable quarter.
Any person, whose registration has been CANCELLED
within 25 days from the date of cancellation of registration

Only one consolidated return shall be filed


for head office and
for all branches.

SCHEDULE OF STAGGERED
FILING OF RETURNS for EFPS FILERS (RR 26-2002)

37

GROUP
A

MONTHLY VAT DECLARATION & PERCENTAGE TAX


RETURNS
25 days ff the end of the month

24 days

-do-

23 days

-do-

22 days

-do-

21 days

-do- (other service activities, misc. business activities)

38

Submission of SLS/SLP
RR 1-2012
All persons liable to VAT such as manufacturers,
wholesalers, service-providers, among others are
required to submit;
Summary List of Sales
Summary List of Purchases

Medium Submission of SLS/SLP

39

Electronic submission
Thru efps
Manually
Use of removable storage media
3.5 inch floppy diskette
USB flash drive
CD
DVD

VAT Exempt Transactions


40

(Sec109 of

NIRC)

(A) Sale or importation of agricultural and marine


food products in their original state, livestock &
poultry for human consumption.
(B) Sale or importation of fertilizers, seeds, seedlings
& fingerlings; fish. Prawn, livestock & poultry feeds,
including ingredients.
- Except specialty feeds for race horses, fighting
cocks, aquarium fish, zoo animals & other animals
generally considered as pets.

VAT Exempt Transactions


41

(Sec109 of

NIRC)

(C) Importation of personal & household effects


belonging to the residents of the Phil. returning from
abroad & non-resident citizens coming to resettle in
the Phil.
-Provided, that such goods are exempt from customs
duties under Tariff & Custom Code of Phil.
(D) Importation of professional instruments &
implements, wearing apparel, domestic animals, and
personal household effects for persons coming

VAT Exempt Transactions


42

(Sec109 of

NIRC)

(D) Importation of professional instruments &


implements, wearing apparel, domestic animals, and
personal household effects belonging to persons
coming to settle in the Phil arriving w/in 90 days
before or after their arrival.
(E) Services subject to percentage tax
(F) Services by agricultural contract growers &
milling for others of palay into rice, corn into grits
and sugar cane into raw sugar

VAT Exempt Transactions


43

(Sec109 of

NIRC)

(G) Medical, dental, hospital, and veterinary services


except those rendered by professionals.
(H) Educational services rendered by private
educational institutions, duly accredited by DepEd,
CHED, TESDA, and those rendered by govt
institutions
(I) Services rendered by individuals pursuant to an
employer-employee relationship
(J) Services rendered by regional or area headquarters
established in the Phil by multinational corporations

VAT Exempt Transactions


44

(Sec109 of

NIRC)
(K)Transactions which are exempt under internatl agreements
to w/c the Phil is a signatory or under special laws.
(L) Sales by agricultural cooperatives duly registered w/ the
CDA; their importation of direct farm inputs, machineries &
equipment, including spare parts thereof, used directly &
exclusively.
-Pursuant to RA 9520, it includes sales made by Coops.
(M) Gross receipts from lending activities
multipurpose coops duly registered w/ CDA

by

credit

or

(N) Sales by non-agricultural, non-electric and non-credit coop


duly registered w/CDA
-Provided, members share capital is =< P15,000.00

VAT Exempt Transactions

(Sec109 of

NIRC)
45

(O) Export sales by persons who are not VATregistered


(P) Sale or real properties not primary held for sale to
customers or held for lease in the ordinary course of
business. Under RR4-2007, sale of real properties
used in business shall be subject to VAT.
o For Low- Cost Housing/Socialized housing.
o Lot
=< P1,500,000; now P1,919,500
o House&Lot =< P2,500,000;now P3,199,200
(Q) Lease of residential unit whose monthly rental is
=< P10,000. (Now P12,800)

VAT Exempt Transactions


46

(Sec109 of

NIRC)

(R) Sale, importation, printing or publication of


books & newspapers, etc. not devoted principally
to publication of paid advertisements
(S) Sale, importation or lease of passenger or cargo
vessels & aircraft for domestic & internatl shipping
or air transport.
(T) Importation of fuel, goods, & supplies by
persons engaged in internatl shipping or air
transport operations

VAT Exempt Transactions


47

(Sec109 of

NIRC)

(U) Services of banks, non-banks financial


intermediaries performing quasi-banking functions,
and other non-bank financial intermediaries
(V) Sale or lease of goods or properties or the
performance of services other than the transactions
mentioned, the gross annual receipts do not exceed
P1,500,000 (Now P1,919,500)

Adjusted Threshold

48

(RR 16-2011) Effective 1-1-12


Section
Sale of Residential Lot Sec. 109(P)
Sale of Residential House & Lot Sec.
109(P)
Lease of residential units Sec. 109(Q)
Sale or lease of goods or properties or
the performance of services Sec.
109(V)

Nov. 1/2005

Adjusted
threshold
amounts

P1,500,000

P1,919,500

2,500,000

3,199,200

10,000

12,800

1,500,000

1,919,500

VAT Exempt Transactions


49

(Sec109 of

NIRC)

(U) Services of banks, non-banks financial


intermediaries performing quasi-banking functions,
and other non-bank financial intermediaries
(V) Sale or lease of goods or properties or the
performance of services other than the transactions
mentioned, the gross annual receipts
do not
exceed P1,500,000 (Now P1,919,500)

PERCENTAG
E TAX
50

51

PERCENTAGE TAXES
NIRC/Ref.
Sec. 116

Taxable
VAT-exempt
persons under
Sec. 109 (V) and
did not opt to
register as VAT
taxpayers
Cooperatives
are exempt

Taxable Base
Annual Gross
Sales/ Receipts
Not Exceeding
P1,919,500.00

Tax
rate
3%

52

Percentage taxes
NIRC/Ref.

Sec. 117

Taxable

Taxable base

Domestic carriers
Gross receipts
a. Car driven by lessee
b. Transportation
contractors/ who
transport
passengers by land
c. Keepers of garage
Except:
d. Bancas
e. Animal-drawn two
wheeled vehicles

Tax rate

3%

53

% TAXES
DOMESTIC CARRIERS
Sec. 117/RR 9-2007

Jeepney for hire


1.Manila and other cities
2.Provincial
Public Utility Bus
Not exceeding 30 passengers
Exceeding 30 passengers but
not exceeding 50 passengers
Exceeding 50 passengers

Year 2006
Updated
Minimum Gross
Monthly
Receipts
P21,900.00
10,967.00
P32,867.88
54,733.00
65,700.00

54

% TAXES
DOMESTIC CARRIERS
Sec. 117/RR 9-2007

Year 2006
Updated Minimum
Gross Monthly
Receipts

Taxis1. Manila and other Cities


2. Provincial

P32,867.00
21,900.00

Car for hire (with chauffeur)

P27,367.00

Car for hire (without chauffeur)

P16,434.00

55

Common Carrier -Land


Transport of
Passenger
Subject to Common
Carriers tax

Transport of
Cargoes
Subject to VAT

56

What is a common carrier?


"any person, corporation, firm or association
engaged in the business of carrying or
transporting passengers or goods or both, by
land, water, or air, for compensation, offering
their services to the public."

57

Percentage taxes
NIRC/Ref.

Sec. 118

Taxable

Taxable
base

Internation Gross
al air/
receipts
shipping
carriers

Tax rate
3%

Domestic
Carriers - Air & Sea

58

DOMESTIC
FLIGHTS
INTERNATIONAL FLIGHTS
ORIGINATING FROM PHILS.

VAT (12%)
ZERO RATED
(0%)

Percentage taxes
60

NIRC/Ref

Taxable

Sec. 119

Tax on franchises
Radio/TV (with the
option to register as
VAT)

Sec. 119

Gas and water


utilities

Sec. 120

Tax on Overseas
Dispatch, Message
or Conversation
Phil. Origin

Taxable base

Not
exceeding
P10M
Annual
Receipts
Gross
Receipts

Tax
rate
3%

2%

Amount Paid 10%

61

Overseas Communication Tax


Composition of total billings =
( IDD charge + 10% OCT)

Exemptions:
1. Government
2. Diplomatic Services
3. International Organizations
4. News Services

62

Percentage taxes
Section/Ref.

Sec. 121
R.A. 9238
RR 9-2004

R.A. No. 9337

Taxable

Banks and nonbank financial


intermediaries
performing quasi
banking functions

Taxable base

a. Interest,
commissions and
discounts from lending
activities as well as
income from financial
leasing, on the basis of
remaining maturities of
instruments
5 yrs. or less
More than 5yrs.
b. Dividends and
equity shares in the net
income of subsidiaries

Tax
rate

5%
1%
0%

63

% TAXES
Section/Re Taxable
f.

R.A. No.
9337

R.A.
No.9337

Taxable base

c. Royalties, rental of
property, real or personal,
profit from exchange and all
other items gross income
d. On net trading gains
within the taxable year on
foreign currency, debt
securities, derivatives and
other similar instruments

Tax rate

7%

7%

64

% taxes
Section /
Ref.

Sec. 122

Taxable

Taxable base

Tax
rate

Other non-bank financial a. Interest, commissions,


5%
intermediaries(non-bank
discounts and all other
R.A. 9238
financial intermediary
items of gross income
RR 9-2004 not performing quasi
banking functions)
b. Interest, commissions
RR16-2005 including pawnshops and
and discounts from
moneychangers doing
lending activities as
business in the Phils.
well as income from
financial leasing, on the
Pawnshops are classified
basis of remaining
as Other Non-bank
maturities of the
Financial Intermediaries
instruments from which
under RR 10-2004
such receipts are
derived:
5%
Maturity of 5yrs. or less
1%

65

Financial
Institutions

5%
1%
7%

Non-bank
Financial
Intermediaries

Banks

Performing
quasi-banking
function

5%, 1%, 7%

Not performing quasibanking function


(INCLUDES FINANCING
COMPANIES)

5%, 1%

66

Percentage taxes
Section /
Ref.

Taxable

Taxable base

Tax rate

Sec. 123

Tax on Life Insurance


Premiums

Total Premium

2%
(RMC 222010)

Sec. 124

Tax on agents of Foreign


Insurance Companies not
authorized in the Phils.

Total Premium

10%

Sec. 124

Tax on agents of Foreign


Insurance Companies
authorized in the Phils.

Total Premium

5%

Sec. 125

Amusement
Taxes on Cockpits

Gross Receipts

18%

67

percentage taxes
Section /
Ref.
Sec. 125

Taxable

Tax
rate

Gross
Receipts

18%

Karaoke bars, karaoke


Gross
televisions, karaoke boxes & Receipts
videoke bars

18%

Sec. 125

Boxing Exhibitions

Gross
Receipts

10%

Sec. 125

Professional basketball
games

Gross receipts 15%

Sec. 125

Jai-Alai and racetracks

Gross receipts 30%

RMC 182010

Cabarets, Nights or Day


Clubs

Taxable base

% TAXES
68

Section
/Ref.
Sec. 126

Sec. 126

Taxable
Tax on Winnings
Every Person Who
wins

Owners of winning
horses

Taxable base
Winnings or
dividends based on
the actual amount
paid for every
winning ticket after
deducting the cost of
ticket

Tax
rate
10%

Winnings from double


forecast/quinella/
4%
trifecta/other
winnings
Prize
10%

PERCENTAGE TAXES
69

Section
/Ref.

Taxable

Taxable
base

Tax
rate

Sec. 127

Tax on Barter or Exchange of


Gross
of 1%
Shares of Stock listed and traded selling
through the local stock exchange price (GSP)

Sec. 127

Through Initial and secondary


public offering-proportion of
shares of stocks dispose to total
outstanding shares
up to 25%

GSP

4%

Over 25% but not over 33 1/3%

GSP

2%

GSP

1%

Over 33 1/3%

70

Tax Forms and Deadlines - manual


Form 2551M
Deadline- 20th day after end of the month
Form 2551Q
Deadline 20th day after end of each quarter for
for Sec. 125 Amusement Taxes (videoke bars,
karaoke bars, karaoke televisions, karaoke boxes
and music lounges per RMC 18-2010).

71

Tax Forms and Deadlines - EFPS


Form 2551M
Group A - 25 days ff. the end of the month
Group B - 24 days -doGroup C - 23 days -doGroup D - 22 days
Group E - 21 days

-do-do-

Form 2551Q
Deadline 20th day after end of each quarter for
for Sec. 125 Amusement Taxes

Example
Percentage Tax Liability
The Gross Income of Mr. A, a Non-VAT taxpayer engaged in
the practice of profession, for the month of October 2013 is
P50,000.00. Compute for the percentage tax liability.
Percentage Tax (PT) Liability for the month of Oct. 2013 is:
Gross Receipts

Percentage tax rate Tax due


Due date: Nov. 20, 2013

P50,000.00
3%
P1,500.00

T
Be On ime
I
Be nformed of the latest BIR
regulations and circulars
P repare correct and accurate returns
S ave money; follow T.I.P.

Thank you!