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VAT is a tax on regular sale or consumption levied on the following: (BELIS2)
Barter
Exchange
Lease
Importation
Sales
Services
Q: Vatable?
A: Yes. Item is an inventory.
Q: Is there a sale?
A: Yes. Sale of watch.
Q: Vatable sale?
A: No. Not a regular sale.
Note: VAT will arise even in the absence of profit (i.e., at a loss) attributable to a
business transaction.
PERSONS LIABLE
Any person who, in the course of trade or business (Doctrine of Regularity), is
considered
seller
lessor
service provider
importer, whether or not made in the course of trade or business
Non-resident persons even if the performance of services is not regular.
Q: Is VAT regressive?
A: Yes. Because VAT has basically flat rate, the poorer you are, the heavier VAT to
you.
Q: May a person earning below the threshold register under the VAT system?
A: Yes. Optional registration. Cannot be revoked within 3 years.
Gross Selling Price: the total amount of money or its equivalent plus excise tax.
Goods: all tangible and intangible objects which are capable of pecuniary
estimation.
Invoice Interpretation:
Sales Invoice VAT Sales Invoice
Gross of Vat Net of VAT
Vat Exclusive VAT Inclusive
Formula: Base x 12% = VAT Base / 1.12 X 12% = VAT
Q: What are the allowable deductions from the gross selling price?
A:
1. Discounts determined and granted at the time of the sale (i.e., trade discounts).
2. Sales returns and allowances for which proper credit or refund was made.
An effectively zero-rated sale are local sale to entity with treaty agreements (e.g.,
PEZA, SBMA).
Q: Are non-stock, non-profit entities liable to pay VAT for sale of goods and
services?
If at the end of any taxable quarter the output tax exceeds the input tax, the
excess shall be paid by the VAT-registered person.
If the input tax exceeds the output tax, the excess shall be carried over to the
succeeding quarter or quarters.
Q: What are the options available to a VAT-registered person, whose sales are (1)
zero-rated, effectively zero-rated, (2) has ceased in business operation, or (3) has
been assessed illegally?
A:
1. To claim for tax credit (TCC); or
2. To claim for refund.
VAT RATES
12 Regular rate
7 Standard input vat
5 Final withholding vat
4 Presumptive input vat
2 Transitional input vat
0 Zero-Rated
Exempt Non-VAT
Regulatory requirements
Monthly 2550M VAT Declaration 20th
Quarterly 2550Q VAT Return 25th
Note: Examinees are commonly confused as regards BIR form for VAT Declaration
or Return. Its VAT Dec if Monthly; VAT return if quarterly. BIR requires only
quarterly returns.