VAT

Question 1

VALUE ADDED TAX
- seller is liable to pay income tax + VAT
- proportional (fixed rate)
- indirect (passed on)

Answer 1

Yes

Question 2

VAT REGISTRATION
- can be mandatory or optional

Who are mandatorily required to register as VAT?

If those who are required to register did not register, they cannot claim input VAT.

Answer 2

Mandatory
- Gross Sales > 3M → past OR next 12 months
- Gross Sales > 10M → Radio and TV

Doon sa 3M
- hindi lang past gross sales yung pagbbase-an, pwede rin na if sa next 12 months mag 3M yung gross sales → mandatory registration

NOTE : VAT exempt sales → do not include for 3M

Question 3

If I am not required to register, but I opted to, I can change my status after 2 years. True or False?

Assuming I am a radio and TV company
If I am not required to register, but I opted to, I can change my status after 2 years. True or False?

Answer 3

• False (3 year lock-in period)
• False (irrevocable)

Question 4

Output VAT less Input VAT
= VAT Payable

Answer 4

Yes

Question 5

If the term is…
- invoice / bill
- payment / collection

VAT inclusive or VAT exclusive?

Answer 5

VAT Inclusive

Terms to use for VAT Exclusive
- selling price
- fair value
- from the books

Question 6

I am regularly conducting a business. Am I liable for output VAT?

I have isolated transactions. Am I liable for output VAT?

Answer 6

• Yes (including incidental transactions)
• No (since “business” tax)

NOTE : For importation, even if not connected to business (brainy yung gov’t, since output VAT)

Question 7

Sources of Output VAT
1. Sale of Goods and Services
2. Sale of Real Property
3. Deemed Sale Transactions
4. Zero-Rated Sales (export)

Answer 7

Yes

Question 8

Sale of Goods and Services
- what is the base?
- what is the timing?

Answer 8

Base
- Gross Selling Price
- Gross Sales less Sales DRA plus Excise Tax
- Discount → must not be dependent upon future event

Timing
- month of sale

Question 9

Sale of Real Property
- what is the base?
- what is the timing?

Answer 9

Base
- higher of SP or FMV

Timing
- month of sale or installment method (!!)

Real Property (Capital Asset) → cannot be subject to VAT (business tax nga e)

Question 10

Deemed Sale Transactions
- what is the base?
- what is the timing?

Answer 10

Base
- FMV

Timing
- month deemed sold

Question 11

Examples of Deemed Sale Transactions (OCDR)
- Originally intended for sale or for use in business
- Consignment (not made within 60 days)
- Distibution or transfer of property (property dividend and dacion en pago)
- Retirement of business or VAT status (XPN : merger and consolidation)

Answer 11

Yes

Question 12

Zero Rated Sales (SEND RIT)

Answer 12

to Separate customs territory
Export sales (irrespective of shipping arrangements)
to Non residents (in acceptable FC)
Domestic carriers (from PH → FC)
Renewable energy (only for generation)
to International carriers (need not be in FC)
to tax exempt by Treaties (need not be in FC)

Question 13

Zero Rated and Exempt
- both have no output VAT

What is the difference between them?

Answer 13

Input VAT
- zero rated → creditable
- exempt → expense

Question 14

Requisites of Input VAT
- buyer must be VAT registered. True or False?
- what is purchased is connected to business. True or False?
- evidenced by VAT invoice. True or False?

Answer 14

• False (both buyer and seller must be registered)
• True - For importation, must also be connected to business (different to output VAT, cause input VAT will ↓ VAT payable)
• True

Question 15

It is considered importation once it is removed from the BOC. Importer has to pay some amounts before it’s removal
- VAT
- Excise Tax
- Customs Duties
- Other expenses

Answer 15

Think of it like inventory in PAS 2

Question 16

Sources of Input VAT
1. Purchase of Goods and Services
2. Purchase of Capital Goods
3. Importation
4. Presumptive Input VAT
5. Transitional Input VAT

Answer 16

Yes

Question 17

Purchase of Goods and Services
- what is the timing?

Answer 17

month of purchase

Question 18

Purchase of Capital Goods
- first, determine MAAC (monthly aggregate acquisition cost)
- if MAAC is 1M, it must be claimed as input VAT outrigh in the month purchase. True or False?
- if MAAC is more than 1M, input VAT (per item) must be deferred then amortized over 90 months or useful life, whichever is longer. True or False?

MAAC → exclusive of VAT

Answer 18

• True → 1M and below = outright
• False → more than 1M = over 60 months, whichever is shorter

Shorter kasi if longer, mas tatagal yung duration na may pambawas ka sa output VAT, which is ayaw ng BIR (gusto nila ASAP, makakolekta sila)

Beginning January 1, 2022 → outright na lagi

Question 19

Importation
- what is the base?

Answer 19

Landed Cost (DUTI CEO)
- Dutiable Value (CIF)
- Customs Duties
- Excise Tax
- Other legal charges

(ignore facilitation fee and from BOC to warehouse)

Question 20

Presumptive Input VAT
- because since they buy from exempt, they cannot avail of the regular 12% input VAT
- available to retailers of SAMAMICOPARE. True or False? What is SAMAMICOPARE?

Answer 20

False - available to processors or manufacturers (✗ retailer)
- Sardines
- Mackerel
- Milk
- Cooking Oil
- Packed Noodles
- Refined Sugar

Question 21

How to solve presumptive input VAT?

Answer 21

Primary Agricultural Purchases
x 4%

purchases, not inventory

Question 22

Transitional Input VAT
- available to those who are from non VAT to VAT
- how to solve?

Answer 22

Inventory, Beg from VAT suppliers (net of VAT)
Add : Inventory, Beg from Non VAT suppliers
TOTAL
x 2%

Choose the value vs actual VAT paid (whichever is higher)

Input VAT (pambawas) siya so aakalain mo na whichever is lower, however kaya higher is ineencourage nila na mag transition to VAT (transitional input VAT)

Question 23

5% Creditable Withholding VAT
- if the sale to government is P100, what is the journal entry?

Answer 23

Dr. Cash 107
Dr. Creditable VAT 5
Cr. Sales 100
Cr. Output VAT 12

7% output VAT - will be received
5% output VAT - will be creditable (withheld)

Question 24

VAT Exempt Transactions
- Importation
- Agricultural
- Cooperatives and Corporation
- People
- Carriers and Transport Operations
- Necessity
- Residential
- Other

Answer 24

Yes

Question 25

VAT Exempt Transactions Importation - professional tools / implements (own use, not for sale) - personal household effects ## Footnote Per item, what are some facts to be considered exempt?

Answer 25

from abroad magssettle sa PH

Question 26

VAT Exempt Transactions Agricultural - Agricultural or Marine Products (original state) - Fertilizers, Livestock, Poultry Feeds - Agricultural Contact Grower and Millers ## Footnote Per item, what are some facts to be considered exempt?

Answer 26

Agricultural or Marine Products (original state) - preparation → broiling, roasting, stripping - preservation → salting, drying, freezing, smoking - packaging → shrink wrapping, tetra packing - polished / husked risk, molasses → original state Fertilizers... - including ingredients - XPN : Specialty Feeds (cocks, pets, zoo)

Question 27

VAT Exempt Transactions Cooperatives and Corporations - Credit Cooperatives - Agricultural Cooperatives - Nons Cooperatives - RAHQ - Bank and Other Non Bank ## Footnote Per item, what are some facts to be considered exempt?

Answer 27

Credit Cooperatives - from lending activities - both to members and non members Agricultural Cooperatives - from own produce - both to members and non members Non Cooperatives - max of 15K capital contribution each member

Question 28

VAT Exempt Transactions People - PWDs - Employer-Employee Relationship - Senior Citizen - Solo Parents ## Footnote Per item, what are some facts to be considered exempt?

Answer 28

PWDs - necessities such as food and medicine Senior Citizens - necessities such as food and medicine Solo Parents - until 6 years old - income → less than 250K annually

Question 29

VAT Exempt Transactions Carriers and Transport Operations - Fuel, Goods, Supplies - Vessels and Aircrafts - Passengers ## Footnote Per item, what are some facts to be considered exempt?

Answer 29

Fuel, Goods, Supplies - international transport operations Vessel and Aircrafts - including engine, equipment, spare parts - domestic or international transport operations Passengers - international carriers

Question 30

VAT Exempt Transactions Necessity - Hospital Services - Educational Services - Books, Newspapers, Bulletins, Magazines - Prescribed Drugs and Medicines ## Footnote Per item, what are some facts to be considered exempt?

Answer 30

Hospital Services - rendered by professional → vatable (e.g. clinic) - outpatient → vatable - inpatient → exempt - laboratory → exempt Educational Services - private and non profit (under DEPED, CHED, TESDA) - government Books... - for paid advertisements → vatable - CREATE → includes electronic format Prescribed Drugs... - Diabetes, Cholesterol. Hypertension → Jan 1 2020 - Cancel, Mental Illness, TB, Kidney → Jan 1 2021

Question 31

VAT Exempt Transactions Residential - Lease of Residential Units - Association Dues and Membership Fee (no profits) - Real Properties ## Footnote Per item, what are some facts to be considered exempt?

Answer 31

Lease of Residential Unit - **max** of 15K monthly rental per unit (**regardless** of 3M threshold) - **more than** 15K monthly rental per unit (**think** of 3M threshold) Association Dues... - by homeowner association and condominiums Real Properties - not held for sale (if still used in business → VAT) - socialized housing - residential lot and parking lot → vatable - residential house and lot → exempt (max of 3,199,200 per unit)

Question 32

VAT Exempt Transactions Other - 3M threshold - Percentage Tax - International Agreements - Export Sales of Not VAT Registered - Gold to BSP ## Footnote Per item, what are some facts to be considered exempt?

Answer 32

3M threshold - exemptions prevail even if more than the threshold (e.g. prescribed drugs → kahit more than 3M, exempt kasi stated na nga sa batas na exempt e)