MELJUN CORTES's - Tax1 (INCOME TAXATION) VAT Lecture

8/9/2019 MELJUN CORTES's - Tax1 (INCOME TAXATION) VAT Lecture

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VALUE ADDED TAXVALUE ADDED TAXVALUE ADDED TAXVALUE ADDED TAX

Pursuant to EXECUTIVE ORDER # 273,approved by her Excellency President

Corazon C. Aquino on July 25, 1987,

VALUE-ADDED TAX LAW took effect on

January 1, 1988.

VAT is not entirely a new concept of business

taxation but is just another form of TAX

levied on a wide range of good and

services. Specifically, it simply

means TAX on the Value addedby every seller to his purchase

of goods & services.


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VAT = is an indirect tax that may be shifted orpassed on to the buyer transferer or

lesse of the goods, properties or

services

VAT = any person who, in the course of traded or

business, sells, barter, exchange, leases

goods or properties, renders services, &

any person who imports goods shall be

subject to VALUE-ADDED-TAX.


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VAT on Sale ofVAT on Sale ofGoods or propertiesGoods or propertiesVAT on Sale ofVAT on Sale ofGoods or propertiesGoods or properties

= Goods or properties shall mean all tangible

& intangible objects that are capable of

estimation.


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GROSS SELLING PRICEGROSS SELLING PRICEGROSS SELLING PRICEGROSS SELLING PRICE= it is the total amount of money or its

equivalent, which the purchaser pays oris obligated to pay to the seller

in consideration of the sale, barter, or

exchange of the goods or properties

excluding the VAT.


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TAX BASETAX BASETAX RATESTAX RATESTAX BASETAX BASETAX RATESTAX RATES

= these shall be levied, assessed & collected on every sale, barteror exchange of goods or properties, VAT equivalent to 10% ofthe gross selling price or gross value in money of the goods or

properties sold, barted or exchanged.

= it is MANDATORY that the total amount appearing in the invoice

include the value added tax without the tax being shown as a

separate item. Thus, the 10% VAT shall be computed byMultiplying the total indicated in the invoice by (1/11).


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GROSS RECEIPTSGROSS RECEIPTSGROSS RECEIPTSGROSS RECEIPTS= It is the total amount of money or its equivalent actually

or constructively received, excluding VAT, as representing

the

1.) contract price, compensation, service fee, rented or

royalty.

2.) amount charged for materials supplied with the services

3.) deposits & advances payment on the contract of

services


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VAT on Importation ofVAT on Importation ofGoodsGoods

VAT on Importation ofVAT on Importation ofGoodsGoods

= there shall be levied, assessed & collected on everyimportation of goods a Value-added tax equivalent to

10% based on the total value used by the Bureau of

Customs in determining TARIFF & custom duties, plan

custom duties, excise tax, if any & other charges. Theimportation prior to the release of such goods from

customs custody shall pay the VAT


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OUTPUT TAXOUTPUT TAXINPUT TAXINPUT TAXOUTPUT TAXOUTPUT TAXINPUT TAXINPUT TAX

OUTPUT TAX = means the value-added tax due on the sale or leaseof taxable goods or properties or services by a

VAT registered person.

INPUT TAX = is the value-added tax due from or paid by a VAT

registered person in the course of his trade or

business on importation of goods or local purchased

of goods or services.


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VAT formula:VAT formula:

Output TAX PxxOutput TAX Pxx

less: Input Taxless: Input Tax xxxx

VAT PayableVAT Payable PxxPxx

VAT formula:VAT formula:

Output TAX PxxOutput TAX Pxx

less: Input Taxless: Input Tax xxxx

VAT PayableVAT Payable PxxPxx


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ZERO RATE orZERO RATE or

Exempt transactionsExempt transactions

ZERO RATE orZERO RATE or

Exempt transactionsExempt transactions

Section 108B, TAX Reform ACT of 1997

- services performed by VAT-registered person which

is subject to ZERO Rate

Section 109(z) of the TAX Reform ACT of 1997

- any person where sales or receipt are exempt from

payment of Value-added tax because gross annualsales or receipt do not exceed the amount of 550,000


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ComplianceComplianceRequirementsRequirements

RegistrationRegistration

ComplianceComplianceRequirementsRequirements

RegistrationRegistration

= any person subject to VAT shall register with the BIR

Revenue District Officer where his principal place of business

is located.Annual registration fee P550 for every separate or distinct

establishments or place of business shall be paid upon

registration & every year thereafter on or before the last day

of January.


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Invoicing RequirementsInvoicing RequirementsInvoicing RequirementsInvoicing Requirements

= a VAT-registered person shall issue, for every sale, an invoice or

receipt. The receipt or invoice should be prepared at least in

duplicate.

Details should indicated:

1.) Name, TIN#, Address of the seller

2.) Date of Transactions, Quantity, Unit Cost & Descriptions

3.) VAT-registered person with his TIN#

4.) Total amount purchaser pay


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Accounting RecordsAccounting Recordsor Accounting Systemor Accounting System

RequirementsRequirements

Accounting RecordsAccounting Recordsor Accounting Systemor Accounting System

RequirementsRequirements= all person subject to VAT tax shall, in addition to the regular

accounting records required, maintain a Subsidiary Sales

JOURNAL and Subsidiary Purchases JOURNAL on whichthe DAILY SALES & PURCHASES are recorded.


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Return & Payment ofReturn & Payment ofValue-added TAXValue-added TAX

Return & Payment ofReturn & Payment ofValue-added TAXValue-added TAX

= In general, every person liable to pay the VAT shall file a

Quarterly return of the amount of his gross sales or receipts

within 25 days following the close of each taxable quarter.

= payment for lease or use of properties or property rights to

non-resident owners shall be subject to 10% withholding tax.

For this purpose, the payor or person in control of the paymentshall be considered as the withholding agent.


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WITHHOLDING TAXESWITHHOLDING TAXESWITHHOLDING TAXESWITHHOLDING TAXESEvery employer making payment of WAGES shall deduct and withhold

upon such wages a tax determined in accordance with the rules and

regulations prescribed by the Secretary of the Department of Finance,

upon recommendation of the Commissioner of the Bureau of

Internal Revenue.

The BASIS of withholding shall be the average WAGES. When a husbandand wife are both recipient of WAGES, whether from the same or from

different employers, taxes to be withheld shall be determined on the

following bases:

1.) The HUSBAND shall be the proper claimant of the additionalexemption with respect to any dependent child, unless he explicitly

waives his right in favor of his wife in the WITHHOLDING exemption

certificate.

2.) TAXES shall be withheld from the WAGES of the wife in accordance

with the schedule for zero exemption of the Withholding Tax TABLE.


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WITHHOLDING TAXESWITHHOLDING TAXESWITHHOLDING TAXESWITHHOLDING TAXESWithholding Taxes = are applied on GROSS PAY after deducting the

MANDATORY employee contributions:- According to Section 32(B) (7) (f) of the TAX REFORM of 1997

GSIS or SSS, Medicare or PhilHealth, Pag-IBIG contributions

union dues of individuals employee are excluded from

GROSS INCOME efefctive Jan. 1, 1998.

This provision coupled with the revised personal exemptions

effectively increased the net pay of compensation income

earners.

Withholding Tax tables are avaible for various payroll periods, such as

daily, weekly, semi-monthly and monthly.

On or before the end of the calendar year but prior to the payment of the

compensation for the last payroll period, the employer shall determine

the TAX due from each employee on taxable compensation income for

the entire taxable year in accordance with the rates prescribed ranging

from 5% to 32%.


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WITHHOLDING TAXESWITHHOLDING TAXESWITHHOLDING TAXESWITHHOLDING TAXES

The difference between the TAX due from

the employee for the entire year and the

sum of taxes withheld from January toNovember shall either be withheld from

his SALARY in December of the current

calendar year or REFUNDED to the

employee not later than January 25 of the

succeeding year.


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WITHHOLDING TAXESWITHHOLDING TAXESWITHHOLDING TAXESWITHHOLDING TAXES

NET PAYNET PAYNET PAYNET PAYGROSS PAY for a payroll period less the payroll DEDUCTIONS

SSS, PhilHealth, Pag-Ibig contributions of the employee;WITHHOLDING TAXES; union dues & other deductions is

equal to

NET PAYNET PAYNET PAYNET PAY

Documents

MELJUN CORTES's - Tax1 (INCOME TAXATION) VAT Lecture