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 Sales (from Gross Selling Price)
- Gross Sales less Sales DRA plus Excise Tax plus charged for materials

Timing
- month of sale

Discount → must not be dependent upon future event
Exclude → earmarked for payment to 3rd party
Exclude → received as reimbursement

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
- export → irrespective of shipping arrangement
- non residents → what is also zero rated?
- RBE → must be directly and exclusively used. True or False?
- Others → RTO

Answer 12

Also zero rated → NR buyer to EOE

RBE
- false → directly attributable to registered activity

Others
- Renewable energy
- exempt by Treaties
- Offshore gaming license

Question 13

Zero Rated Sales
EOE → what is also zero rated?
- must be directly and exclusively used. True or False?
- export must be ?

Carriers
- Domestic → anything. True or False?
- International

Answer 13

Also zero rated → BMW of EOE (bonded manufacturing warehouse)

EOE
- false → directly attributable to registered activity (before : RM + packaging only)
- export → must be atleast 70% of production last year

Carriers
- Domestic → anything (from PH to FC)
- International → sale/service to them (treat them as non residents)

Question 14

Output VAT credit
- from what?
- when is it applied?
- optional or mandatory?
- what is the result?

REQUISITES
- after April 27, 2024
- VAT amount and credit term → indicated in invoice
- VAT → not claimed as deduction

Answer 14

from uncollected receivables (apply next quarter)
optional (result → buyer cannot claim input VAT)

Question 15

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 15

• 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 16

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 16

Think of it like inventory in PAS 2

Question 17

Zero Rated and Exempt
- both have no output VAT

For regular sales, input VAT can be refunded. True or False?

for zero rated sales, input VAT can be refunded. True or False?

for exempt sales, input VAT can be refunded. True or False?

Answer 17

False, True, False
- regular sales = creditable only
- zero rated = creditable or refundable
- exempt = expense

Question 18

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 18

Yes

Question 19

Purchase of Goods and Services
- what is the timing?

Answer 19

month of purchase

Question 20

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 20

• 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 21

Importation
- what is the base?

Answer 21

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

(ignore facilitation fee and from BOC to warehouse)

Question 22

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 22

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

Question 23

How to solve presumptive input VAT?

Answer 23

Primary Agricultural Purchases
x 4%

purchases, not inventory

Question 24

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

Answer 24

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 25

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

Answer 25

Dr. Cash 107 Dr. Creditable VAT 5 Cr. Sales 100 Cr. Output VAT 12 ## Footnote 7% output VAT - will be received 5% output VAT - will be creditable (withheld)

Question 26

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

Answer 26

Yes

Question 27

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 27

Hospital Services - rendered by professional → vatable (e.g. clinic) - 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 2019 - Cancel, Mental Illness, TB, Kidney → Jan 1 2021

Question 28

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 28

from abroad magssettle sa PH

Question 29

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 29

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 - **3,600,000 in 2024**)

Question 30

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

Answer 30

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 31

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 31

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 32

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 32

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 33

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

Answer 33

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) International Agreements, Export Oriented Enterprise - to WHO / EOE → zero-rated - from WHO / EOE → exempt Export Oriented Enterprise - export → atleast 70% of production last year - directly attributable to registered activity

Question 34

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 34

Fuel, Goods, Supplies - international transport operations - sale → zero-rated - importation → exempt Vessel and Aircrafts - including engine, equipment, spare parts - domestic or international transport operations Passengers - international carriers