VAT

• BUSINESS TAX

  • those imposed upon onerous transfers such as sale, barter, exchange, and importation
  • tax on a business
• Business

  • habitual commercial activity
• Gratuitous transfers

  • not subject to business tax but subject to transfer taxes
• Onerous Transfer

  • In the ordinary course of trade or business including incidental transactions
• Types of Business Tax

  1. Value-added Tax
  2. Other percentage taxes or simply Percentage Tax
  3. Excise Tax
• Threshold amount

  • more than 3,000,000 per annum
• Indirect tax

  • sellers can pass the burden to pay tax to buyers
• Subject to 0% Rate

  1. Export Sales
  2. Zero rated sales of services
  3. Effectively Zero Rated Sales of Goods and Property
• Destination Principle

  • Goods and services are taxed only in the country where these are consumed.
• Cross border principle

  • No VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of the taxing authority.
  • exports are zero-rate while imports are taxed
• Input tax

  • VAT due from or paid by a VAT-registered person in the course of his trade or business on importation of goods or local purchase of goods or services.
• Output Tax

  • VAT due on the sale or lease of taxable goods or required to register under the section 236 of the Tax Code.
• Impact of Tax

  • on the statutory taxpayer, the one from whom the government collects
  • on the seller upon whom the tax has been imposed
• Incidence of Tax

  • on the one who bears the burden of taxation
  • on the final consumer
• Transitional Input Tax

  • 2% of beginning inventory
• Presumptive Input Tax

  • 4% of the gross value in money of their purchases of primary agricultural products.
• Tax Credit Method

  • refers to the manner by which the VAT of a taxpayer is computed.
• If output tax is more than input tax, the excess has to be paid.
• If input tax is more than output tax, the excess shall be carried over to the succeeding quarter/s.
• Lease of Residential Units

  • If the lease payments if more than 15,000 monthly and the annual rentals are less than 3,000,000 = VAT Exempt, Subject to 3% Percentage Tax
  • If the lease payments if less than 15,000 monthly = VAT Exempt, not subject to 3% Percentage Tax
  • If the lease payments if more than 15,000 monthly and the annual rentals are more than 3,000,000 = Subject to 12% VAT, Subject to 3% Percentage Tax
• The seller is directly liable to pay VAT
• The rate of VAT is 12% and 0%
• Transaction deemed sale

  • not actually sales because of the absence of actual exchange between the buyer and the seller, are considered or included in the term "sale"
• Zero rated sale of service

  1. Foreign currency
  2. Foreign client
  3. Service must be done within the Philippines
• Transactions Deemed Sale

  1. Transfer, use or consumption not in the course of business of goods or properties 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; or(b) Creditors in payment of debt;
  3. Consignment of goods if actual sale is not made within sixty (60) days following the date such goods were consigned; and
  4. Retirement from or cessation of business, with respect to inventories of taxable goods existing as of such retirement or cessation.
• Domestic Carriers and Keepers of Garage - Gross Receipts - 3%
• International air and shipping carriers - gross receipts - 3%
• Radio and/or television broadcasting - gross receipts of not exceeding 10 million - 3%
• Gas and water utilities - Gross receipts not exceeding 10 million - 2%
• Life Insurance - Premium - 2%
• Agents of Foreign Insurance Company - Premium - 4%
• Life Insurance directly taken from Foreign Insurance Companies - Premiums - 5%
• Winnings in horse races - winnings after deducting the cost of the ticket - 10%
• Winnings in double, forecast/quinella and trifecta bets - winnings after deducting the cost of the ticket - 4%
• Owners of winning race horses - 10%
• gaming tax - entire gross gaming revenue - 5%
• Maturity period

  • 5 years or less - 5%
  • More than 5 years - 1%
• Pre-termination

  If maturity is shortened, the tax rate applied based on the new maturity period
• Dividend and Equity Shares

  Net income of subsidiaries - 0%
• Other income sources

  • Royalties
  • Rentals (real or personal property)
  • Profits from exchange and other gross income items under Sec. 32 - 7%