Value Added Tax(Tax 71 - H)

VAT

VAT Definition• Value-added tax is a tax

on the value added to the purchase price or cost in the sale or lease of goods, property or services in the course of the trade or business.

Value Added Tax Reform Act• Republic Act 9337 also known as the Value Added

Tax Reform Act• Every person who, in the course of trade or business,

sells, barters, exchanges, leases goods or property, or renders services is subject to VAT, if the aggregate of his actual or expected gross sales and/or gross receipts exceeds One million Nine Hundred Nineteen Thousand Five Hundred Pesos (P1, 1919, 500.00). Any person who imports goods is likewise subject to value-added tax. R.A. 9337 took effect on Nov. 1, 2005.

Vat on sale of Goods or Property• Goods or property shall mean all tangible and intangible

objects that are capable of pecuniary estimation shall include:

• Real property held primarily for sale to customers or held for lease in the ordinary course of trade or business.• The right or the privilege to use patent, copyright, design, or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right.• The right or the privilege to use in the Philippines of any industrial, commercial or scientific equipment.• The right or the privilege to use motion picture films, films, and discs• Radio television, satellite transmission and cable television time

Gross Selling Price• Gross selling price is the total amount of

money or its equivalent, which the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or exchange of the goods or properties, excluding the value-added tax.

• The excise tax, of any, on such goods or property shall form part of the gross selling price.

Tax Base and Rates• There shall be levied, assessed and collected on every sale, barter or

exchange, or transactions deemed sale” of taxable goods or property, value-added tax equivalent to 12% of gross selling price or gross value in money of the goods or property sold, bartered exchange, or deemed sold in the Philippines.

• The following sales by VAT-registered persons shall be subject to Zero-Rate:• Export sales• Foreign currency denominated sale means sale to a non-resident of

goods except those mentioned in Sections 149 (automobiles) and 150 (non-essential goods), assembled or manufactured in the Philippines for delivery to a resident in the Philippines, paid for in acceptable foreign currency and accounted for in accordance for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas.• Sale of good or property to persons or entities whose exemption under special law or international agreements to which the Philippines is a signatory, such as, Asian Development Bank, International Rice Research Institute, shall be effectively subject to VAT at zero-rate

Export Sale

• The sale and actual shipment of goods from the Philippines to a foreign country.

• Sale of raw materials or packaging materials to a non-resident buyer.

• Sale of raw materials or packaging materials to export-oriented enterprise.

• Sale of gold to the Bangko Sentral ng Pilipinas if the seller is a VAT-registered taxpayer.

Transactions Deemed Sale• The following transactions are “deemed sale” and

are subject to VAT:1. Transfer, use or consumption not in the course of

business of goods or property originally intended for sale or for use in the course of business.

2. Distribution or transfer to:a. Shareholders or investors as share in the profits of the VAT-registered persons.b. Creditors in payment of debt or obligation.

Transactions Deemed Sale

3.Consignment of goods if actual sale is not made within sixty (60) days following the date such goods were consigned.

4.Retirement from or cessation of business, with respect to inventories of taxable goods as such of retirement of cessation.

Sale of Real Properties (Based on New Thresholds)

• Sale Of real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business of the seller shall be subject to VAT. The following sale of properties is subject to output VAT:

1. Sale of residential lot with gross selling price exceeding P1, 919,500.00.

2. Sale of residential house and lot or other residential dwellings with gross selling price exceeding P 3,199,200.00.

3. Instalment sale of residential house and lot or other residential dwellings with gross selling price exceeding P 1,000,000.

4. A real estate investment trust shall be subject to VAT on its gross sales from any disposal of real property.

Advance VAT • Advance VAT – On Transport of Naturally

Grown and Planted Timber Products. • Requirement to pay advance VAT• The advance VAT shall be paid by the

owner/seller to the BIR through the authorized agent banks or to the revenue collection officers or deputized city or municipal treasures before transporting them from place of production or concession

Advance VAT Payment

• Basis for Determining Amount of Advance VAT Payment

• The amount of advance payment shall be determined by applying the VAT rate of 12% on the corresponding value per cubic meter of the different species of naturally grown and planted timber products in accordance with the following schedule:

Advance VAT • Advance VAT – Sale of Refined Sugar• Refined sugar refers to sugar whose content

of source by weight, in the dry state, corresponds to a Polari meter reading of 95.5 and above.

Advance VAT Payment

• Basis for Determining Amount of Advance VAT Payment

• The amount of advance payment shall be determined by applying the VAT rate of 12% on the applicable base price per 50 kg. bag of refined sugar.

Advance VAT• Advance VAT- Sale of Flour Milled from

Imported Wheat• Revenue regulations 29-2003 aim to level the

playing field among players in the flour- milling industry and to encourage proper declaration and payment of taxes which will result in improved efficiency in tax administration.

Advance VAT• Advance VAT- Sale of Jewelry, Gold and Other Metallic

Minerals to NRA-NETB or NRFC• Revenue Regulations 5-2013 prescribes the tax treatment of

the sale of jewelry, gold and other metallic minerals to non-resident alien individual not engaged in trade or business within the Philippines, or to a non-resident foreign corporation.

• Sellers of jewelry, gold, and other metallic minerals are required to pay business tax, income and excise tax, if applicable, in advance through the assigned Revenue Collection Officers of the Revenue District Office having jurisdiction over the place where the subject transaction occurs regardless of whether the sellers are duly registered with the BIR.

How to compute Value Added Tax PayableValue Added Tax Payable is normally computed as follows:

1. Example based on the assumption: Total Vatable Sales (VAT exclusive) = P100,000 Total purchases with VAT receipts (VAT exclusive) = P70,000

• P100,000 x 12% or P12,000• -P 70,000 x 12% or P8,400• VAT Payable = P3,600

1. Computing Net VAT Payable on VAT “exclusive” Sales/Receipts

• Total Output Tax Due or Total Vatable Sales/Receipts x 12%

• Less: Total Allowable Input Tax or Total Vatable Purchases x 12%

• Equals: VAT Payable

2. Computing Net VAT Payable on VAT “inclusive” Sales/Receipts

• Total Output Tax Due or Total Vatable Sales / 1.12 x 12%

• Less: Total Allowable Input Tax or Total Vatable Purchases / 1.12 x 12%

• Equals: VAT Payable

2. Example based on the above assumption:

Total Vatable Sales (VAT inclusive) = P112,000

Total purchases with VAT receipts (VAT inclusive) = P78,400

P112,000 /1.12 x 12% or P12,000– P78,400 /1.12 x 12% or P8,400 VAT Payable = P3,600

• Output tax means the VAT due on the sale, lease or exchange of taxable goods or properties or services by any person registered or required to register under Section 236 of the Tax Code.

• Input tax means the VAT due on or paid by a VAT-registered on importation of goods or local purchase of goods, properties or services, including lease or use of property in the course of his trade or business. It shall also include the transitional input tax determined in accordance with Section 111 of the Tax Code, presumptive input tax and deferred input tax from previous period.

• Total Vatable Purchases are your total purchases from VAT registered suppliers. This should be supported with VAT receipts.

• Note:VAT exempt sales, zero rated sales, purchases not qualified for input tax, and other input taxes (if any) should also be shown in the VAT returns. See BIR Forms.

TAXABLE BUSINESS INDUSTRIES

(Hand outs)

VAT EXEMPT TRANSACTION