VAT registeres person has topay vat even if his sales do not exceed 3K threshold

VAT registrable persons whose sales exceed vat threshold are subject to vat even without vat in /input ta

VAT THRESHOLD
GENERAL - 3K, applied to all tax payers other tha franchise grantees of radio and television
SPECIAL - 10K applied to franchise grantee of radio or television

A non vat tax payer has the following sales

poultry,hog,feeds and fertilizers
Fruits and vegetable
Barbeque vendor
Restaurant business
Professional practice
taxi cab operation
Groceries
Cloths and apparels
Equipment
Shoes

groceries
clothes
professional practice
resto
equipment
shoes
gross sales
Applicable business tax

NOTES Married couples are separately being tax for their respective business
Brach income is part of head office gross sales computation
Non vat tax payer has a locked in period of three years
In case of mixed sales applicable business tax remain including exempt sales. however if the taxpayer o

A vat taxpyer taxpayer sold 150K vatable sales on account, exclusive of VAT
AR
Output VAT
Sales

Purchased from supplier 200000 inclusive of vat

Purchases
Input tax
Accounts Payable
 Vat out
Vat in
Vat due

Monthly transactions exclusive of VAT

Purchases
Sales

Input
Outpu
Tax due

Tax due

January Purchases
Input tax
Accounts Payable

Accounts receivable
Sales
Output tax

Output tax
Input Tax

February Purchases
Input
AP

AR
output tax
Sales

Output tax
Input tax

March Purchases
Input tax
Accounts Payable

AR
Output tax
Sales
Output tax
Input Tax

Quarterly tax due

Sales

Tax payable before prior months payaments

Prior months payments
VAT due and payable

sales vat exclusive

input vat

Vat on sales
Less input

quarterly due

SALES subject to SPECIAL VAT RULES

Sales to the government
zero rated sales
Exempt sales

Sales to goverment and GOCC

Vatable by 12 % sales to the government and GOCC, but 5% shall be withheld by the government on thei
> invoice sales to the government will be deducted .05 final tax based on sales receipt.
> 5% shall serve as the actual tax due on the sale. no more VAT payable.

Vat registerred person made a sale of goods to GOCC for 560K inclusive of 60K VAT
Mdse sold was acquired at 504K inclusive of 54K vat

Purchases/inventory
Input tax
Cash/AP

AR / cash
Withheld final tax
sales
 output tax

COS
inventory

Output tax
cos
Final tax
input tax

REPORTING
OUTPUT
LESS INPUT
VAT DUE
LESS FINAL TAX
VAT PAYABLE

ZERO RATED SALES

> Export sales [foregn consumption] is subject to zero vat
> vat in can be used as refund, tax credit thru TCC and can be deducted to other vat output
> also applied to local sales under PEZA and persons engaged in international transport operations
> local sales to IRRI and ADB

VAT registered person exported 15000 dollar worth of mdse to buyer in the US [50exchange rate]
The sold mdse was purchased at a cost of 560K inclusive of vat

Purchases/inventory
Input vat
Cash/AP

Cash/ AR
Sales

cos
inventory

if refunded
cash
input

if applied to TCC
Prepaid tax
input tax

if applied to other output

 output
input

EXEMPT SALES

Sale of unprocessed agri product

Purchase cost of agri product
Other cost of supplies attributed to this sale inclusive of vat

purchases/inventory
Supplies
Input vat
Cash/AP

AR / cash
Sales

Cost sales
Spplies exp
supplies
inventory
input

Reporting period
2550M
2550Q

Sources of Regular Output VAT

Sale of vatable goods
Sale of vatable services
Sale of vatable proprties
Transaction deemed sale

SALE OF VATABLE GOODS

> 12% og gross selling price less return and discount

illustration SM has the following sales on January exclusive of vat

Sales on account
cash sales
Installment sales
Delivery charges
Advances from customer
total

gross selling
on account
cash sales
Installment sales
Delivery charges
Gross selling

Output vat

Unreasonably lower selling price - lower than 30% of actual mar

Vat should be based on fair value [as determined by CIR]
> except when the party is the government, where in VAT is based on selling price despite lower than 3
> reporting month os sale

Seller made the following sale to private customer

customer a
customer b
customer c
customer d
city government
gross selling

Vat registered individual service provider had the following revenue and collection for the mon
> sale of services inludes gross receipts [collected revenue]
> reporting month of collection

billings for material

service fee
advances from other customer

gross receipt should be

Sale of vatable properties

> higher of selling and Fair market value
> FMV is higher of zonal and assesed [assesors office value]
> if no zonal value basis would be higher of assesment value of consideration [selling price]
> If gross selling is based on zona;l valueor assessors fair value of the property the assumption is exclusive
> if gross selling is based on consideration it is presumed to be inclusive of vat
Villain realtor sold commercial lots in August of 2019
Appraisal value
Zonal value
Assesors value
selling price

Gross selling [market value-higher of assesed or zonal]

Output vat

Realtor sold the property below

zonal
assessors fair value
selling price

gross selling
vat

Note sale of residential lot is vat exempt up to 3,199,200

Installment reporting of output vat on real properties

> may be reported in installment if the initial payment from such sale does not exceed 25% of selling price

A realtor sold on July 1, 2010 a commercial lot as follows

Zonal value
Assesed value
Selling price
DP is 1M and the balance is made payable in 5years starting August1 2019. Vat output is

Ratio of initial payment is determined until the end of the year of sale
Down pyment
August
Sept
Oct
Nov
Dec

Monthly Billing should be

monthly installment
output vat
Billing starting August onwards
Reportable Vat output per quarter

Output tax on interest and penalty

Realtor sold real property with far value of 4M for 3M. output vat [ 480K]
Assume that vat output is qualified for installment reporting
During the month the realtor should received the following net of VAT
Installment - 300000, Interest 15K, Penalty 4K

Reportable output VAT per collection

Installment
interest
penalty
output vat

Sale of property considered as Ordinary Asset are Vatable

> includes land,buildg, equipment,machineries,improvements
> other than vat the seller is liable to pay income tax for his gain on sale of ordinary asset
> if seller is non vat

RFN sold the following properties

Old warehouse
Branch Office building
Rest house in tagaytay [fmv-500K, selling 600000]
Vacant lot in Mandaue acquired as investment fmv- 700K selling 600K]

Sale of properties not in the ordinary course of business [capital assets] are not vatable
6% cgt of fv or selling price
 vat even if his sales do not exceed 3K threshold
ales exceed vat threshold are subject to vat even without vat in /input tax

payers other tha franchise grantees of radio and television

se grantee of radio or television

ollowing sales
exepmt ₱300,000.00 ₱390,000.00
exempt ₱100,000.00 ₱130,000.00
processed food ₱15,000.00 ₱19,500.00
₱350,000.00 ₱455,000.00
₱150,000.00 ₱195,000.00
opt common carrier ₱75,000.00 ₱97,500.00
₱900,000.00 ₱1,800,000.00
₱250,000.00 ₱750,000.00
₱300,000.00 ₱900,000.00
₱50,000.00 ₱65,000.00
₱2,490,000.00 ₱4,802,000.00

₱900,000.00 ₱1,800,000.00
₱250,000.00 ₱750,000.00
₱150,000.00 ₱455,000.00
₱350,000.00 ₱195,000.00
₱300,000.00 ₱900,000.00
₱50,000.00 ₱65,000.00
₱2,000,000.00 ₱4,165,000.00
3% 12%

being tax for their respective business

ffice gross sales computation
n period of three years
e business tax remain including exempt sales. however if the taxpayer opted to apply vat to non vatable sales then it would vatable

K vatable sales on account, exclusive of VAT

₱168,000.00
₱150,000.00
₱18,000.00

0 inclusive of vat
₱178,571.43
₱21,428.57
₱200,000.00
 ₱18,000.00
₱21,428.57
(₱3,428.57)

January February March

₱1,000,000.00 ₱1,200,000.00 ₱1,500,000.00
₱950,000.00 ₱1,400,000.00 ₱1,600,000.00

₱120,000.00 ₱144,000.00 ₱180,000.00

₱114,000.00 ₱168,000.00 ₱192,000.00
(₱6,000.00) ₱24,000.00 ₱12,000.00
(₱6,000.00)
₱18,000.00

₱1,000,000.00
₱120,000.00
₱1,120,000.00

₱1,064,000.00
₱950,000.00
₱114,000.00

₱114,000.00
₱114,000.00

₱1,200,000.00
₱144,000.00
₱1,344,000.00

₱1,568,000.00
₱168,000.00 ₱18,000.00
₱1,400,000.00

₱150,000.00
₱150,000.00

₱1,500,000.00
₱180,000.00
₱1,680,000.00

₱1,792,000.00
₱192,000.00
₱1,600,000.00
 ₱180,000.00
₱180,000.00

Total Vat
₱3,950,000.00 ₱474,000.00
₱3,700,000.00 ₱444,000.00
₱30,000.00
(₱18,000.00)
₱12,000.00

April May June

₱900,000.00 ₱1,500,000.00 ₱2,000,000.00
₱90,000.00 ₱192,000.00 ₱222,000.00

April May June

₱108,000.00 ₱180,000.00 ₱240,000.00
₱90,000.00 ₱192,000.00 ₱222,000.00
₱18,000.00 (₱12,000.00) ₱18,000.00

ES subject to SPECIAL VAT RULES

limited claimable input tax
no output VAT but with claimable input vat
no output, no input

ales to goverment and GOCC

vernment and GOCC, but 5% shall be withheld by the government on their purchases.
nt will be deducted .05 final tax based on sales receipt.
x due on the sale. no more VAT payable.

ale of goods to GOCC for 560K inclusive of 60K VAT

K inclusive of 54K vat

₱450,000.00
₱54,000.00
₱504,000.00

₱535,000.00
₱25,000.00
₱500,000.00
 ₱60,000.00

₱450,000.00
₱450,000.00

₱60,000.00
₱19,000.00
₱25,000.00
₱54,000.00

₱60,000.00
₱35,000.00
₱25,000.00
₱25,000.00
₱0.00

ZERO RATED SALES

tion] is subject to zero vat
ax credit thru TCC and can be deducted to other vat output
er PEZA and persons engaged in international transport operations

15000 dollar worth of mdse to buyer in the US [50exchange rate] ₱750,000.00

t a cost of 560K inclusive of vat ₱560,000.00

₱500,000.00
₱60,000.00
₱560,000.00

₱750,000.00
₱750,000.00

₱500,000.00
₱500,000.00

₱60,000.00
₱60,000.00

₱60,000.00
₱60,000.00
 ₱60,000.00
₱60,000.00

₱600,000.00
₱400,000.00
d to this sale inclusive of vat ₱89,600.00

₱400,000.00
₱80,000.00
₱9,600.00
₱489,600.00

₱600,000.00
₱600,000.00

₱400,000.00
₱89,600.00
₱80,000.00
₱400,000.00
₱9,600.00

Reporting period
20th of succeding month
25th of the end quarter

Tax Basis
gross selling price unless unreasonably lower
gross receipts
gross selling price defined by BIR
Fair value of property deemed sold

return and discount

n January exclusive of vat

₱600,000.00
₱300,000.00
₱200,000.00
 ₱20,000.00
₱150,000.00
₱1,270,000.00

₱600,000.00
₱300,000.00
₱200,000.00
₱20,000.00
₱1,120,000.00
₱0.12
₱134,400.00

onably lower selling price - lower than 30% of actual market

e [as determined by CIR]
overnment, where in VAT is based on selling price despite lower than 30% compared to market value

e to private customer
selling fair value basis of gs
0.59 ₱100,000.00 ₱170,000.00 ₱170,000.00
1.88 ₱300,000.00 ₱160,000.00 ₱300,000.00
0.75 ₱90,000.00 ₱120,000.00 ₱90,000.00
1.03 ₱350,000.00 ₱340,000.00 ₱350,000.00
₱1,000,000.00 ₱1,500,000.00 ₱1,000,000.00
₱1,910,000.00

ice provider had the following revenue and collection for the month
eceipts [collected revenue]

revenue collection balance

₱500,000.00 ₱300,000.00 ₱200,000.00
₱600,000.00 ₱300,000.00 ₱300,000.00
₱400,000.00
₱1,100,000.00 ₱1,000,000.00 ₱500,000.00
₱1,000,000.00

Sale of vatable properties

esed [assesors office value]

e higher of assesment value of consideration [selling price]
a;l valueor assessors fair value of the property the assumption is exclusive of VAT
sideration it is presumed to be inclusive of vat
 al lots in August of 2019
₱5,000,000.00
₱4,500,000.00
₱3,500,000.00
₱3,900,000.00

higher of assesed or zonal] ₱4,500,000.00

₱0.12
₱540,000.00

₱6,000,000.00
₱5,500,000.00
₱6,500,000.00

₱6,500,000.00 ₱5,803,571.43
₱696,428.57 ₱696,428.57

vat exempt up to 3,199,200

ut vat on real properties

t if the initial payment from such sale does not exceed 25% of selling price

commercial lot as follows

₱8,000,000.00 ₱960,000.00
₱6,500,000.00
₱7,000,000.00 ₱6,000,000.00 ₱100,000.00
e payable in 5years starting August1 2019. Vat output is
reportable
mined until the end of the year of sale vat installment
₱1,000,000.00 1M/7M*960000 ₱137,142.86
₱100,000.00 ₱13,714.29
₱100,000.00 ₱13,714.29
₱100,000.00 ₱13,714.29
₱100,000.00 ₱13,714.29
₱100,000.00 ₱13,714.29
₱1,500,000.00
0.21

₱100,000.00
₱13,714.29
₱113,714.29

3rd
 july august sept
₱137,142.86 ₱13,714.29 ₱164,571.43

ar value of 4M for 3M. output vat [ 480K]

fied for installment reporting ₱480,000.00
ould received the following net of VAT
5K, Penalty 4K

300000/3000000*480K ₱48,000.00
₱1,800.00
₱600.00
₱50,400.00

₱144,000.00
y considered as Ordinary Asset are Vatable
nt,machineries,improvements
le to pay income tax for his gain on sale of ordinary asset

subject to vat cgt

₱4,000,000.00 ₱4,000,000.00
₱15,000,000.00 ₱15,000,000.00
K, selling 600000] ₱600,000.00 ₱600,000.00
as investment fmv- 700K selling 600K] ₱700,000.00 ₱700,000.00
₱19,000,000.00 ₱1,300,000.00
₱2,280,000.00 ₱78,000.00
inary course of business [capital assets] are not vatable
sales then it would vatable

₱133,928.57 ₱16,071.43

₱178,571.43 ₱21,428.57
 Total VAT
₱3,700,000.00 ₱444,000.00
₱3,950,000.00 ₱474,000.00
Total
₱4,400,000.00 ₱528,000.00
₱504,000.00 ₱504,000.00

quarterly
₱528,000.00
₱504,000.00
₱24,000.00
(₱18,000.00)
₱6,000.00
0.67
₱164,571.43

₱41,142.86

4th
 oct nov dec
₱13,714.29 ₱13,714.29 ₱41,142.86
Part 2

Vat tax payer sold the following

Old warehouse [bv 2000,0000]
Idle lot purchase as investment

Output Vat computed as follows

Warehouse
Vat out
Note: warehouse sales is also subject to regular tax
sales of idle lot is subject to capital gains higher of fmv or gross selling
** if seller is non vat tax payer no vat out

TRANSACTIONS DEEMED SALES

1. transfer, use or consumption not in the course of business of goods or propertiesoriginally intended for sale or f
2. Distribution or transfer to:
a. shareholder or investors in the profit of vat registered person
b. creditors in payment of debts
3. consignment of goods if actual sale is not made with in 60 days following the date such goods were consigned
4. retirement from or cessation of business with respect to all goods on hand whether capital goods,
stock in trade, supplies or materials as of the date of cessation, whether or not the business is continued by the
5, cessation of status as a vat registered person

Transfer, use or consumption not in the "Ordinary Course of Business"

> happens when vatable ordinary assest are used for purposes other than their intended purpose such as:
1. goods or properties held for sale are no longer sold but are transferred or disposed of by other means other than
2. Properties originally intended for use are no longer used but are transferred, disposed of or exchanged with oth

CONSUMPTION NOT IN THE ORDINARY COURSE OF BUSINESS

a. withdrawal by the business owner for personal used goods held for sale or properties held for used
b. using goods held for sale or properties held used for use to pay off debts with creditors
c. Using goods held for sale or properties for use as property dividends to share holders
d. Exchange of goods held for use for other properties
e. sale or disposal of properties held for use in exchange for cash or other properties

Vat regisred person withdrew the following from his grocery store for persnal use

various fruits and vegetable

various processed goods

vat out
A vat realtor transferred a commercial lot with zonal value of 500K and assessors value of 450K in excha
Such exchanged is deemed sale with vat out of
Vat out
Note: in case realtor acquired control of Bill inc it would be vat exempt since initial acquisiton

Realtor transferred a property held for sale in trust to his daughter . Cost 3M and fmv 3.5M
Such gift is deemed sale subject to vat 3.5M*.12
> if revocable trust no vat since no transfer yet
> if transfer to accredited non profit org no vat

Realtor declared the following properties as distribution of property divide

Shares of Marks corp
Various merchandise

CONSIGNED GOODS NOT WITHDRAWN IN 60 DAY

> presumed sold /vatable
> purpose is to prevent tax payers from deferring recognition of profit

VAT taxpayers has the following results of operation for the period April 30

Sales own inventories

Sales reported by consignees
Sales in behalf of consignors
Commission income on goods sold for consignors
Additional info: billed prices of outstanding consignment with consignee as of 4/30
January
February
March
April

VAT computation
Sales own inventories
Sales reported by consignees
Commission income on goods sold for consignors
CONSIGNED GOODS NOT WITHDRAWN IN 60 DAY
Jan
February
Total vatable
VAT OUT

RETIREMENT OR CESSATION OF BUSINESS

> cessation of business makes all assets of the business become assets of his personal disposal
> if business continued by new owner, considered sold to new owner

VAT Tax payer ceased business in June of 2020

Cash
AR
Investment
Sacks of rice
Inventories
PPE

OUTPUT VAT computation

Inventories
PPE
Vatable
OUTPUT

> vat applies only to goods and properties

> investments,ar,cash are considerred capital assets not vatable
> agri product vat exempt

GENERAL RULE: BUSINESS DISSOLUTION IS DEEMED SALE

1. Change of ownership
> incorporation of sole propreitor
> sale of propreitors business
2. dissolution of partnership
>creation of new partnership
> incorporation of partnership
Note: change in controlling shareholders,change of trade or name,change of address not considerred deemed sal

Exception to business Dissolution Rule

> Merger or consolidation - there is dissolution but not a deemed sale under the law, input tax of dissolve corp will
> cessation of status as VAT registered person - no dissolution but deemd sale treatment on goodas and and prope
a. change of business activity from vat to exempt status
b. approvalof request for cancellation of registration due to reversion to exempt status
c.. approval of request for cancellation of registration due to desire to revert to exempt status after the lapse of 3 c
by aperson who voluntarily registered despite being exempt

d. approval of cancellation of registration of one who commesnced business with expectation of gross sales or rece
exceed this amount during the first twelve months of operation

Output tax on transactions deemed sales

> based on fmv of the goods sold as of the occurence of deemed sale transaction
> in case of retirement and cessation of business it shall be based on the acquisition cost or current market price w
> fmv shall be determined by CIR IN CASES of "deemed sale and gross selling is unreasobly lower"
> sale of properties and goods deemed sold shall no longer be subject to VAT [details of paid vat shall be indicated
 > deemed sale rules applies only to VAT tax payers

*** Vat tax payer ceased business operation with the following properties book and fair value

cash
ar
investment
inventories
PPE

Output tax computation

Inventories
PPe

Output tax

NON VAT tax payer made the following sales and consignment
sales of goods
sale of equipment
consigned goods over 60 days

> quoted price normally include vat except when theres agreement between seller and buyer on whose to shoulde
> if vat is not separately bill in the invoice, then it will be presummed vat inclusive
> the same rule if vat is incorrectly billed

sale
vat [wrong computation]

Correct Vat

ZERO RATED SALES

> foreign consumption [export sales] or equivalent of foreign consumption [foreign currency denominated sALES }
> and constructive export- sale delivery of raw mat , finished goods or semi finished goods from customer bonded w
> SALES conferred with an export sale treatment by special laws / international agreement where in the Phils is a si
> non vat tax payer is also exempt of 3% tax
> zero output but with deductble input

ZERO RATED VS EXEMPT SALES

> both are free from vat output
>input tax on exempt sales can not be refunded, nor creditable vat but can be used as deduction in the income tax
Tax payer purchased goods for 400K excluding vat of 48K
It sell the goods outside the Phils for 12000 dollars equivalent to 510K with other expenses of 10K

Assume that seller is vat registered

output
input

sales
less : cos
gross income
less Deduction
taxable income
income tax due

> vat is not claimed as deduction from gross income because it a tax credit or tax refund

Assume taxpayer is non vat

sales
less:cos inclusive of vat
gross profit
deduction
taxable income
income tax due

Vat applied as deduction resulting to partial decrease in income tax payable

>vat exempt sales results to partial tax relief while zero rated results to a total relief

tax table comparison

output
input treatment
extent of relief

ZER RATED SALES OF GOODS

1. export sales
2. effectively zero rated

EXPORT SALES
1. direct export
2. sale to economic zone and tourism enterprise zone
3. sale of goods or properties,supplies, equipment and fuel to persons engaged in international shipping or air tran
 DIRECT EXPORT
sale or actual shipment of goods from the philippines to foreign country, irrespective of shipping
arrangement that influences or determine transfer of ownershipof goods exported
>paid for in acceptable foreign currency or its equivalent in goods or services
>accounted for in accordance with the rules and regulations of the BSP

Bruce corp sold various goods as follows

Resident alien
visiting tourist
filipino employed in japan
bisiness in Indonesia

zero rated
sale to filipino in japan
sale to indonesia business
zero rated gross sales

VAT sales
resident alien
visiting tourist
gross sales domestic consumption subject to vat
output vat
> subject to vat because they are consumed in the phils

Compny made the following export sales durin the year

export destination
exported to: hongkong
thailand
Japan
Indonesia

VAT TREATMENT

exported to: hongkong

thailand
Japan
Indonesia

*** > deemed exempt because not qualified as zero rated due to peso payment
> cant be charged with vat because its for foreign consumption [law have no intent of charging export sales with

A vat registered compny exported the following

processed food
fruits and vegetables

> both sales shall be zero rated

> input shall be creditable against output or claimable as refund or tax credit
> fruits and veg are exempt for domestic consumption but zero rated for foreign consumption
> if tax payer is non vat both sales are vat exempy, input can be claimed as expense

EXPORT COMMISSION AND CONSIGNMENT

> export sales include commission income
> consigned exports can only be considered sales unless sold by consignee

Vat registered export trader buys goods from domestic manufacturer, rebrands them and sell them to foreign custo
It also export goods for other domestic company without export permit and also makes occationa domestic sales

Transaction for the quarter were as follows

sales
commission on sales made for other company
unsold consignments
less than 60 days
over 60 days

sales
commission on sales made for other company
unsold consignments
less than 60 days
over 60 days
Total sales

> deemed sales rule applies only to domestic sales

SALE TO ECONOMIC ZONES AND TOURISM ZONE

> ecozones are considered foreign territories hence sales to enterprises registered to these zones are considered te

Philippine Ecozones
Phil Economic Zone Authority
Cagayan Economic Zone
Zambuanga Special Eco Zone
Clark Special Ecozone
Clark Freeport Zone
Poro Point Special Economic Zone And Freeport
John Hay Special Ecozone
Aurora Special Ecozone

> zero rated sales to ecozone was vetoed by the president under TRAIN making these industries to be subject to va
> but TRAIN did not repeal section 8 of RA 7916" the special Economic zone Act[making industries under ecozone t
> voluminous claims for vat refund resulting to subjecting these industries causes workloads to BIR a

SALE OF GOODS,SUPPLIES, EQUIPMENT AND FUEL TO PERSONS ENGAGED IN INTERNATIONAL SH

> these are generally used / consumed outside the philippines
> construed as foreign consumption
> attributable to transport of goods and passengers from philippine port directly to foreign port and vice versa with
unless for the purpose of loading or unloading of passengers and cargo outbound and inbound

Vat taxpayer sold supplies to PanAm airlines

PanAm division
domestic operation
international operation

EFFECTIVELY ZERO-RATED SALES

This refers to sales to persons or entities whose exemption under special
laws or international agreements to which the Philippines is a signatory
effectively subjects such sales to zero-rate.

Examples of entities are granted indirect tax exemption under special laws
or international agreements:
1. Asian Development Bank (ADB)
2. International Rice Research Institute (IRRI)
3. United Nation (UN) and its various organizations, such as:
a. World Health Organization
b. UNICEF
4. United States Agency for International Development (USAID) and its
personnel and contractors (RMC 40-07)
5. Embassies, qualified employees and dependents - subject to the
reciprocity rule
6. Philippine National Red Cross (PNRC) - Sec 5 (C), RA 10072
7. Philippine Amusement and Gaming Corporation (PAGCOR) and its
licensees or contractors-PD 1869
Because of the indirect tax exemption, the sales of these entities are
effectively subject to 0% VAT.

Requirement for effective zero-rating

Generally, effective zero-rating of sales requires prior application with the
appropriate BIR office. Without an approved application for effective zero-
rating, the transaction otherwise entitled to zero-rating shall be considered
exempt (Sec. 4.106-6, RR16-2005).

An approved application shall be given prospective effect from the date

received by the BIR. The same shall be valid until December 31 of the same
year and renewable every year thereafter.

Where to file application for zero rating?

Taxpayers shall file their application with the Audit Information, Tax
Exemption and Incentives Division (AITEID) under the Assessment Service.
For large taxpayers, applications shall be filed with the Large Taxpayer
Audit and Investigation Divisions I and II (LTAID I and II), BIR National
Office.

The VAT reciprocity exemption on embassies and their personnel

Embassies and their qualified employees and dependents of employees do
not have indirect tax exemption under The Vienna Convention on Diplomatic
Relations, but they may be exempt under the principle of reciprocity.
Under the reciprocity rule, foreign governments granting Philippine
embassies and diplomats indirect tax exemption shall likewise be conferred
the same treatment on their embassies or diplomats in the Philippines.
Countries granting indirect tax exemption to Philippine embassies and
personnel are listed by the DFA (BIR Ruling DA-ITAD-98-08, 100-08, 101-08).
Qualified foreign embassies and their qualified personnel and qualified
dependents of the latter are issued VAT Exemption Certificates (VEC) or
VAT Exemption Identification Cards (VEIC).
VAT taxpayers selling to foreign embassies, personnel or their dependents
with VEC or VEIC shall be entitled to the benefit of zero-rating. (See RM0-81-
99 and RMO 22-2004)

Illustration
ABC Corporation, a VAT supplier, sold office supplies and equipment to the following embassies

embassy
ukraine embassy
russian embassy

PREVIOUSLY ZERO-RATED SALES

1. Foreign currency denominated sale*
2. Sales under the internal export program*
3. Sales to Boy Scout of the Philippines
4. Sale of gold to BSP - now exempt effective January 1, 2018
"To be subjected to 12% VAT upon successful completion and implementation of an effective VAT refund
The term "Foreign currency denominated
sale" means sale to non-residents of goods,except export automobiles and non essential commodities a
manufactured in the Philippines for delivery to a resident in the Philippines, paid for
in acceptable foreign currency and accounted for in accordance with the rules and
regulation of the BSP.

Sales under the Internal Export Program of the government

Sales of locally manufactured or assembled goods for household and personal use of
Filipinos abroad and other non-residents of the Philippines as well as returning
overseas Filipinos under the Internal Export Program of the government paid for in
convertible foreign currencies and accounted for in accordance with the rules and
regulations of the BSP shall also be considered export sales.

ZERO-RATED SALES OF SERVICES

Eventually, zero-rated sales of services will only include:
1. Sale of services to non-residents
2. Effectively zero-rated sales of services
3. Services rendered to persons engaged in international shipping or
international air transport operations including leases of properties
thereof
4. Transport of passengers and cargoes by domestic air or sea carriers
from the Philippines to a foreign country
5. Sale of power or fuel generated from renewable sources of energy
6. Services rendered to ecozones or tourism enterprise zones

SALES OF SERVICES TO NON RESIDENTS

> Services other than processing,manufacturing or repacking rendered to a person engaged in business conducted
or to a non resident person not engaged in business who is outside the Phils when services are performed
> other services is not limited only to project studies, information services, and engineering anf architectural design
> requirement for zero rating of services to non resident :
a. must be performed in the Phils
b. must be paid in acceptable foreign currency or its equivalent goods or services
c. payment accounted for by BSP RUELS

VATtaxpayer sell sewing services. sale for the period

client
FEU
NIKE apparel
Dior

VAT consultant provides the following services

client
foreign corporation
RFC
NRFC

EFFECTIVELY ZERO RATED SALES OF SERCVICES

> Sale of services to person or entity who was granted indirect tax exemption thru special laws or internati

VAT tax payer provides security and janitorial services to the building of the IRRI and paid tax payer 200K for serv
It is zero rated but need to secure approval from BIR

Realtor leases residential units to various embassy personnel of foreign government

Embassy personnel
Putin
Putocheco
Putcheb

SERVICES RENDERED TO PERSON ENGAGED IN INTERNATIONAL SHIPPING OR AIR TRANSPORT OPERATION, INCLU
> services rendered shall be exclusively for international shipping or air transport operations

Maintenance provider clients: Malaysian Air

Air Phils

TRANSPORT OF PASSENGERS AND CARGO BY DOMESTIC AIR OR SEA CARRIER FROM PHILS
> outgoing transport of services of domestic air or sea carrier connstitute services rendered in the Phils to non resi
> inbound transport services of domestic air or sea carrier constitute services rendered abroad no non resident, he

Cebu airline receipts

Inbound flights foreign country to Phils
outbound flights - Phils to foreign country
Domestic flights

Japan Liner an international sea carrier has the following receipts for the period
Incoming
outgoing

> exemption from vat due to internation carrier

 ₱1,600,000.00
₱3,000,000.00

₱1,600,000.00
₱192,000.00

mv or gross selling

TRANSACTIONS DEEMED SALES

ess of goods or propertiesoriginally intended for sale or for use in the course of business

60 days following the date such goods were consigned

all goods on hand whether capital goods,
sation, whether or not the business is continued by the new owner or successor

sumption not in the "Ordinary Course of Business"

oses other than their intended purpose such as:
are transferred or disposed of by other means other than sale
d but are transferred, disposed of or exchanged with other properties

N NOT IN THE ORDINARY COURSE OF BUSINESS

ods held for sale or properties held for used
to pay off debts with creditors
ty dividends to share holders

or cash or other properties

grocery store for persnal use

fmv book value
₱5,000.00 ₱6,000.00 exempt
₱20,000.00 ₱18,000.00

₱2,400.00
value of 500K and assessors value of 450K in exchange of shares of stocks of BILL inc.
₱500,000.00
₱60,000.00
e vat exempt since initial acquisiton

sale in trust to his daughter . Cost 3M and fmv 3.5M at date of transfer

lowing properties as distribution of property dividends

₱3,000,000.00 subject stock transfer tax .006/no vat
₱4,000,000.00 vatable

for the period April 30

₱3,500,000.00
₱500,000.00
₱1,500,000.00
₱300,000.00
ith consignee as of 4/30
₱300,000.00
₱600,000.00
₱500,000.00
₱800,000.00

₱3,500,000.00
₱500,000.00
₱300,000.00

₱300,000.00
₱600,000.00 ₱900,000.00
₱5,200,000.00
₱624,000.00

R CESSATION OF BUSINESS
come assets of his personal disposal
 ₱900,000.00
₱500,000.00
₱150,000.00
₱300,000.00
₱600,000.00
₱3,000,000.00
₱5,450,000.00

₱600,000.00
₱3,000,000.00
₱3,600,000.00
₱432,000.00

LE: BUSINESS DISSOLUTION IS DEEMED SALE

or name,change of address not considerred deemed sale cause its not dissolution

ception to business Dissolution Rule

eemed sale under the law, input tax of dissolve corp will be used by absorbing corp
tion but deemd sale treatment on goodas and and properties originally intended for sale

o reversion to exempt status

to desire to revert to exempt status after the lapse of 3 consecutive from time of registration
who voluntarily registered despite being exempt

mesnced business with expectation of gross sales or receipts exceeding 3M but who failed to
mount during the first twelve months of operation

ut tax on transactions deemed sales

emed sale transaction
based on the acquisition cost or current market price which ever is lower
le and gross selling is unreasobly lower"
be subject to VAT [details of paid vat shall be indicated on the invoice]
owing properties book and fair value
Book Value FMV
₱90,000.00 ₱90,000.00
₱200,000.00 ₱200,000.00
₱250,000.00 ₱400,000.00
lower ₱300,000.00 ₱350,000.00
₱700,000.00 ₱600,000.00 lower

₱300,000.00
₱600,000.00
₱900,000.00
₱108,000.00

payer made the following sales and consignment

₱300,000.00 subject to percentage tax
₱100,000.00 not subject to transfer tax
₱40,000.00 not subject to transfer tax

greement between seller and buyer on whose to shoulder vat,

esummed vat inclusive

₱150,000.00
₱15,000.00 ₱18,000.00
₱165,000.00
₱147,321.43 ₱150,000.00
₱17,678.57 ₱15,000.00

ZERO RATED SALES

gn consumption [foreign currency denominated sALES }
ed goods or semi finished goods from customer bonded warehouse ,PEZA/ECO ZONE/FREE PORTS
laws / international agreement where in the Phils is a signatory

ZERO RATED VS EXEMPT SALES

able vat but can be used as deduction in the income tax return
ent to 510K with other expenses of 10K

₱0.00
₱48,000.00

₱510,000.00
₱400,000.00
₱110,000.00
₱10,000.00
₱100,000.00
₱20,000.00

se it a tax credit or tax refund

₱510,000.00
₱448,000.00
₱62,000.00
₱10,000.00
₱52,000.00
₱10,400.00

ncome tax payable

ated results to a total relief

vat exempt zero rated

no output no output
deductible from gross income creditable/refundable
partial full

to persons engaged in international shipping or air transport operations

o foreign country, irrespective of shipping
fer of ownershipof goods exported
n goods or services
ns of the BSP

place delivered payment

Phils 15K dollars 52 /dollar vat
Phils 420K peso vat
Japan 800K Yen .5 / yen zero rated
Indonesia 10K dollar services 52/dollar zero rated

zero rated
₱400,000.00
₱520,000.00
₱920,000.00

VAT sales
₱780,000.00
₱420,000.00
₱1,200,000.00
₱144,000.00

terms payment
fob destnation 100K dollars 52 per dollar
fob destnation 450K peso
fob shipping pt 800K yen .5/yen
free alongside vessel 10K dollars

IF THE COMPANY IS
VAT REGISTERED NON VAT
zero rated exempt
exempt *** exempt
zero rated exempt
zero rated exempt

e to peso payment
ption [law have no intent of charging export sales with vat]

amount input
 200K dollar 25K
50K euro 45K

efund or tax credit

zero rated for foreign consumption
an be claimed as expense

SSION AND CONSIGNMENT

ld by consignee

nufacturer, rebrands them and sell them to foreign customers.

xport permit and also makes occationa domestic sales

export dollar denomination domestic

400K 2M
50K 450K

20K 250K
30K 150K

zero rated 12% vat

₱20,800,000.00 ₱2,000,000.00
₱2,600,000.00 ₱450,000.00

₱150,000.00
₱23,400,000.00 ₱2,600,000.00

C ZONES AND TOURISM ZONE

o enterprises registered to these zones are considered technical importation
under TRAIN making these industries to be subject to vat
al Economic zone Act[making industries under ecozone to be considerred as foreign territories, status quo on charging vat is maintained b
hese industries causes workloads to BIR a

ND FUEL TO PERSONS ENGAGED IN INTERNATIONAL SHIPPING AND AIR TRANSPORT OPERATIONS

hilippine port directly to foreign port and vice versa without stopping or docking at any port in the Phils
gers and cargo outbound and inbound

amount
400000 vatable
500000 zero rated

ATED SALES
ption under special
nes is a signatory

ax exemption under special laws

t (USAID) and its

subject to the

AGCOR) and its

ese entities are

ve zero-rating
application with the
n for effective zero-
 shall be considered

ect from the date

ember 31 of the same

or zero rating?
ormation, Tax
Assessment Service.
e Large Taxpayer
II), BIR National

bassies and their personnel

ents of employees do
nvention on Diplomatic
of reciprocity.
ng Philippine
likewise be conferred
n the Philippines.
embassies and
-98-08, 100-08, 101-08).
nel and qualified
ertificates (VEC) or

l or their dependents
o-rating. (See RM0-81-

and equipment to the following embassies

exemption status sales

without reciprocity ₱400,000.00 vatable
with reciprocity exemption ₱600,000.00 zero rated

ATED SALES

etion and implementation of an effective VAT refund system

 xport automobiles and non essential commodities assembled or
ent in the Philippines, paid for
ccordance with the rules and

gram of the government

household and personal use of
ines as well as returning
of the government paid for in
cordance with the rules and

F SERVICES

nal shipping or
of properties

air or sea carriers

urces of energy

ON RESIDENTS
ng rendered to a person engaged in business conducted outside the Phils
is outside the Phils when services are performed
mation services, and engineering anf architectural designs. The term encompasses any other services.

valent goods or services

item amount vat

school uniform ₱900,000.00 ₱900,000.00
garments 150000.00 dollar
curtains ₱2,000,000.00

Place rendered amount VAT

abroad 300000 dollar
 Phils 200000 yen 200000
pHILS 2000000

indirect tax exemption thru special laws or international agreement shall be treated as ZERO VAT

the building of the IRRI and paid tax payer 200K for services rendered

ersonnel of foreign government

VATstatus Rental VAT
russian with VEIC 60000
Ukrainian w/o VEIC 20000 20000
Mongolian w/o VEIC 14000

ONAL SHIPPING OR AIR TRANSPORT OPERATION, INCLUDING LEASE OF PROPERTY FOR USE THEREOF
ipping or air transport operations

service fees received shall be subject to zero rated

service fees received shall be vatable

BY DOMESTIC AIR OR SEA CARRIER FROM PHILS TO FOREIGN COUNTRY

ier connstitute services rendered in the Phils to non residents. hence zero rated
constitute services rendered abroad no non resident, hence VAT exempt

₱5,000,000.00 exempt
₱4,000,000.00 zero rated
₱3,000,000.00 vatable

eceipts for the period

6000000 exempt
7000000 VAT exempt, but subject 3% percentage tax
0.006
o on charging vat is maintained by DOF.
 zero exempt

150000.00
₱2,000,000.00

ZERO EXEMPT
300000 NOT IN THE PHILS
 DOMESTIC CONSUMPTION
2000000 PESO DENOMINATION

ZERO RATED EXEMPT

60000

14000 BELOW 15k THRESHOLD

 CREDITABLE INPUT
a. input must be paid / incurred in the course of trade or business
b. must be evidence by invoice or OR
c. VATregistered invoice only
d. input incurred in relation to vatable sales

VAT taxpayer has the following purchases for the amount. He has 250 output tax from sales
Goods from non vat supplier
goods from vat suppliers
Import vehicle for personal use, vat inclusive
Imports of fruits for sale
Imports of merchandise for sale
Services from vat supplier with receipt [ordinary/not registered]

output
input
vat due

Tax payer has the following transactions

Input traceable to regular vat domestic sales
Input tax vatfrom exempt sales
Input vat from export sales

TYPES OF INPUT TAX

1. Transitional
2. Regular
3. Amortization Of Deferred Input
4. Presumptive Input
5. Standard Input
6. Input Vat Carryover

TRANSITIONAl INPUT VAT

> person who becomes liable to vat or any person who elects to be a vat registered person shall be given an initi
credit equivalent of 2%
of the beginning inventory of goods, materials or supplies or the actual vat paid thereon whichever is higher
> goods exempt from vat shall be excluded
> based on vatable beginning inventory in the month of registration as vat tax payer

A non vat taxpayer opted to be vat registered. He had the following inventory
Vat exempt goods
Vatable goods purchased from non vat suppliers
Equipment purchased from vat supplier
total beginning inventory

> 2% input credit is intended to benefit newly vat registered personswhether or not they paytaxes on their previou
> applies only to beginning inventory of good, material and supplies, not on capital goods /assets

A non vat tax payer exceeds the 3M vat threshold, hence become vatable for the month of October. His
VAT exempt goods
Vatable goods purchased from non vat suppliers
purchases from non vat seller
purchases from vat seller
Total december 31

actual vat paid to supplier

value of vatable goods
vatable non vat seller
vatable vat seller

2% transitional input
> input tax is not part of inventory for vat tax payer
> purchses from vat seller includes vat

Non vat Tax exceeds the vat threshold of previous month. beg for the current period were as follows
Meat,egg,dried fish
fruits and vegies
grocery items from vat supplier
appliances from vat supplier

VAT realtor started as vat with the following initial inventories

Raw land acquired fom non vat seller
various equipment
office building
land where office building stands

> inventory pertain to goods for sale only

REQUISITES FOR CLAIMS OF TRANSITIONAL INPUT

a. submission of inventory list
b. entry for recognizing transitional input in the books of accounts
Transitional input
 beginning inventory

REGULAR INPUT TAX

> Domestic purchases of goods services or properties
> importation of goods or services

TIMING OF CREDIT FOR REGULAR INPUT

SOURCE
Purchase of goods or properties
Purchase of services
importation
Purchase of depreciable capital goods or properties
general treatment
when monthly aggregate acquisition cost exceeds 1M

Purchase of non depreciable vehicles and maintenance uncurred thereon

PURCHASE OF GOODS OR PROPERTIES and services

> can be exclusive of vat [cost*.12]
> if inclusive [ amount/1.12]
Importation
> vat on importation [ if exclusive of input - landed cost *.12]
[exclusive - landed cost /1.12]
> vat claim on importation can be claimed on month paid

Input on purchase of capital goods

> if monthly aggrgate acquisition cost of depreciable capital goods:
a. does not exceeds 1M the input is claimable in the month of purchase
b. exceeds 1M the input is deferred and amotized over the useful life in months or 60 months whicever is shorter
> input to be amortized is called the deferred input tax
> monthly aggregate acquisition cost of depreciable capital goods refer to the total price excluding vat,agreed upo
> depreciable capital goods means goods or properties with estimated useful life of more than one year which are

VAT registered tax payer purchased the followingcapital goods April of 2020
capital goods
equipment
truck **

** acquired on installment 150K per month

> monthly aggregate

 VAT taxpayer made the following purchases August of 2020
Purchases
goods for sale
car for personal use
computer for business use
Machineries for business use

monthly aggregate
computer for business use
Machineries for business use

*** Sale or transfer of depreciable capital with 5 years

> > transferred or sold with in 5 years or before exhaustion of the amortizable input thereon, the unamortized inpu

selling price
output vat

original cost
Accumulated depreciation
unutilized vat

output
deferred input tax
vat payable

cash
acculated depreciation
equipment
output vat
gain on sale

output
deferred input
vat payable

Scheduled phase out of amortization treatment

> treatment of deferred input tax under TRAIN will be phased out effective january 1,
2022. previous deferal will continue even after that date
> deferred input will be claimed outright in the month of purchase after that date

SPECIAL RULES ON INPUT TAX CREDITS

a, non depreciable vehicle
> only one vehicle for land transport is allowedfor use of an officialor employee, value of which should not exceed
 > no depreciation is allowed for yacth, helicopters, airplanes and vehicle exceeding 2.4M, unless the main busine
operation or lease of transport equipment and vehicles used in operation

> must have official receipt for the purchase

> need for vehicle must be substantiated in relation of conduct of trade or operation, profession
> non conformance of these shall render the vehicle non depreciable for income tax purposes
> input tax on the purchase of non depreciable vehicle including repair and maintenance input tax are disallowed

INPUT VAT ON CONSTRUCTION IN PROGRESS

> the cost of uncompleted construction work of asset
> > the accumulated billings in progress of the contractor for the extent of completionof asset under construction
> upon completion the contruction in progress account is reclassified to the appropriate asset account
> it is considered purchase of service instead of goods
> input tax is creditable for each payment of progress billing from contracto,

January 2020 taxpayer hired theservice building contractor for 11.2M fixed price contract inclusive of vat. The co

Quarterly data relates to project

quarterly bill
payments

input tax claimable per quarter

INPUT TAX ON PURCHASE OF REAL PROPERTY ON INSTALLMENT

> OUTPUT VAT OF THE SELLER IS THE INPUT VAT CLAIMABLE BY THE BUYER

INPUT VAT ON GOODS AND PROPERTIES DEEMED SOLD

> mdse previously deemed sold when the tax payer retire from business 1000 pcs costing 20K with output tax of 24
The sale was indicated the invoice where in output tax was charged for the goods previously deemed sold and the

Gross selling price

vat previously tax as deemed sale
sales

> buyer can only claim 1200 instead of 1286

PRESUMPTIVE TAX

> Person or firm engaged in the processing of sardines, mackerel, and milk and in the manufacturing of refined sug
and packed noodle based instant meal are allowed of
 "presumptive input tax of 4%" of the gross value of purchasesof agri products which are used in production. cod
pare which meas sardines,mackerel,milk,cooking oil,packed noodles and refined sugar

> Processing mean pasteurization, canning,and activities which throuh physical or chemical process alter the exter
form or inner substance of a product in such a manner as to prepare it for special use to which it could not have b
original form or condition

> it is an incentive to these processors who bought vat exempt raw mat due no claimable input

A vat registered manufacture purchased the following raw mat and supplies for process

copra
hexane solvent
cans and bottle containers
sodium hydroxide/carbonate
activated carbon

During the month hewas able to produced 1000 cans and 1500 bottles of cooking oil. sold 800 cans and 1200 bottle
Presumtive tax for copra 1200000*.04

output
less input

VAT PAYABLE
output tax from sales
₱300,000.00 no input
₱280,000.00 input
₱1,300,000.00 not allowed as deductible input, not intended for business
₱500,000.00 exempt
₱900,000.00 input
₱150,000.00 fake/ unregistered receipt

₱250,000.00
₱126,428.57 ₱1,180,000.00
₱123,571.43 ₱1,053,571.43 ###
₱126,428.57

₱200,000.00 creditable
₱100,000.00
₱300,000.00 creditable

gistered person shall be given an initial input tax

aid thereon whichever is higher

₱100,000.00
₱60,000.00 subject to 2% input
₱150,000.00 not goods for sale
 ₱310,000.00

r not they paytaxes on their previously acquired inventory beginning

pital goods /assets

ble for the month of October. His beginning inventory contains the following
₱30,000.00 exempt

₱70,000.00
₱20,000.00
₱120,000.00

₱17,857.14 ₱2,142.86 Actual vat

₱70,000.00
₱17,857.14
₱87,857.14
₱1,757.14

urrent period were as follows

₱50,000.00
₱20,000.00
₱60,000.00 ₱53,571.43 ₱6,428.57 actual
₱25,000.00
₱155,000.00 vatable beg -grocery
appliances

higher ₱6,428.57 transitional input

₱1,571.43

₱9,000,000.00 ₱180,000.00 transitional input

₱5,000,000.00
₱18,000,000.00
₱3,000,000.00
R INPUT
TIMING OF CREDIT
month of purchase
month paid
month vat paid

month of purchase
amortize over useful life in months
or 60 months whichever is shorter
not creditable [rr12-2012]

hs or 60 months whicever is shorter

total price excluding vat,agreed upon one or more assets acquired and not the payments or installments made during the calendar month
fe of more than one year which are treated as depreciable assets for income tax purposes, used directly or indirectly in production or sale

purchase price input useful life

₱500,000.00 ₱60,000.00 4 yrs 72000
₱800,000.00 ₱96,000.00 10 years
₱1,300,000.00 ₱156,000.00

₱1,300,000.00 exceeds 1M
 Price input vat useful life
₱900,000.00 ₱108,000.00 non depreciable asset but creditable on v
₱900,000.00 ₱108,000.00 not included personal use
₱350,000.00 ₱42,000.00 3years
₱650,000.00 ₱78,000.00 7 years

₱350,000.00 ₱42,000.00
₱650,000.00 ₱78,000.00
₱1,000,000.00 ₱120,000.00 credited August 2020

nput thereon, the unamortized input or deferred input tax can be claimed during the calendar month or quarterwhen sale or transfer hap

₱2,000,000.00
₱240,000.00

₱2,500,000.00 ₱300,000.00
₱1,000,000.00
₱120,000.00

₱240,000.00
₱120,000.00
₱120,000.00

₱2,240,000.00
₱1,000,000.00
₱2,500,000.00
₱240,000.00
₱500,000.00

₱240,000.00
₱120,000.00
₱120,000.00

REDITS

e, value of which should not exceed 2.4M

eeding 2.4M, unless the main business is transport
hicles used in operation

ration, profession
e tax purposes
intenance input tax are disallowed

pletionof asset under construction

propriate asset account

ice contract inclusive of vat. The construction was subject to 10% retentionwhich would be released upon completion

1st qtr 2nd qtr 3rd qtr 4th qtr

₱2,240,000.00 ₱4,480,000.00 ₱3,360,000.00 ###
₱2,016,000.00 ₱4,032,000.00 ₱3,024,000.00 ###
₱1,800,000.00 ₱3,600,000.00 ₱2,700,000.00 ###
₱216,000.00 ₱432,000.00 ₱324,000.00 ###

pcs costing 20K with output tax of 2400, subsequently half of the mdse was sold for 12K vat inclusive.
ods previously deemed sold and the billed the buyer as follows:

₱12,000.00 ₱10,714.29 ₱1,285.71 supposed output

₱1,200.00 10/20*2400 input allowed to buyer
₱10,800.00

in the manufacturing of refined sugar, cooking oil

re allowed of
 s which are used in production. code: sa mami co
ked noodles and refined sugar

al or chemical process alter the exterior texture or

ecial use to which it could not have been put in its

claimable input

cost input
₱1,200,000.00 ₱0.00
₱50,000.00 ₱6,000.00
₱200,000.00 ₱24,000.00
₱80,000.00 ₱9,600.00
₱100,000.00 ₱12,000.00
₱1,630,000.00 ₱51,600.00
ng oil. sold 800 cans and 1200 bottles to variuos whole salers fo 2.8M
₱48,000.00

₱2,800,000.00 ₱336,000.00
(₱51,600.00)
(₱48,000.00)
₱236,400.00
ed for business
 ₱53,571.43
₱25,000.00
₱78,571.43
₱1,571.43
transitional input
tallments made during the calendar month
directly or indirectly in production or sale of taxable goods or services

deferred
₱1,250.00
₱1,600.00
₱2,850.00 monthly credit starting Apri 2020
 non depreciable asset but creditable on vat sales
not included personal use

month or quarterwhen sale or transfer happen

leased upon completion

total
₱11,200,000.00
₱11,200,000.00

supposed output
 POINTERS ON

1. It doesnt mean that if a taxpayer is VAT registered then said taxpayer can only apply the 12% rate.

2.  There are two VAT rates:  12% and 0%.

3.  There are two types of Zero Rated: a.) Export Sales b.) Effectively Zero Rated Sales

4.  In general there are two types of VAT Exempt transactions: a.) Export Sales b.) Sale in original state

5.  A transaction not to be subject to 12% must: a. export sale and paid in foreign currency

6.  An export sale paid in local currency is subject to 12% VAT rate.

7.  A resident foreign VAT taxpayer is subject to 12% VAT rate.

8. Importation means purchases made to entities outside of the country or in foreign land.

9. All importation passes through Customs inspection hence tariff and taxes are paid before imported go

10.  Billings received by importers are generally in foreign currency and is net of any tariff duties and tax

11.  It is only upon payment of the VAT that importers can pull out their imported goods.

12.  Entities registered in economic zones are technically considered entities outside of the Philippine te

14.  Inversely, any purchases made from PEZA entities will be considered as an importation, hence all du
 Zero Rated Versus VAT Exempt
VAT Registered- Zero Rated Transaction
ABC Inc.
Purchases from VAT suppliers P
VAT Input ( 392,000/1.12)*12% P
Sales to XYZ Incorporated ( Singapore ) $
Exchange Rate $1 = P 42.50 P
Allowable business expense P
Assumed: ABC Inc. is VAT registered
1. Compute VAT liability:
VAT transaction:
*Output VAT P
Less: Input VAT
Excess Input VAT
Sale is ZERO RATED:
A. It is considered an EXPORT SALE
b. Payment made by XYZ is in Fx Currrency

2. Compute Income tax liability @ 30% RCIT

Sales P
Less: Cost of Goods Sold
Gross Income P
Less: Allowable business expense
Taxable Net Income P
RCIT Rate
Regular Corporate Income Tax/Income Tax Due P

Note: Input VAT of P 42,000 cannot be claimed as a deduction because

against gross income because ABC Inc is VAT registered taxpayer.

Assumed ABC Inc. is Non VAT registered

1. Compute VAT liability
Why? ABC is NON VAT REGISTERED ENTITY

2. Compute Income tax liability @ 30% RCIT

Sales
Less: Cost of Goods Sold (350,000 + *42000)
Gross Income
Less: Allowable business expense
Taxable Net Income
RCIT Rate
Regular Corporate Income Tax/Income Tax Due

Note: The input VAT from the purchases from VAT registered suppliers
was claimed as a DEDUCTION AGINST GROSS INCOME because ABC
was a NON VAT REGISTERED ENTITY OR IN SHORT ABC IS VAT EXEMPT
rsus VAT Exempt

392,000.00
42,000.00
12,000.00
510,000.00
10,000.00

-
42,000.00
- 42,000.00

510,000.00
350,000.00
160,000.00
10,000.00
150,000.00
30%
45,000.00

NONE!!!!

510,000.00
392,000.00
118,000.00
10,000.00
108,000.00
30%
32,400.00